AGREEMENT AND PLAN OF ORGANIZATION
dated as of the 18th day of March, 1997
by and among
COMFORT SYSTEMS USA, INC.
FREEWAY ACQUISITION CORP.
(a subsidiary of Comfort Systems USA, Inc.)
FREEWAY HEATING & AIR CONDITIONING, INC.
and
the STOCKHOLDERS named herein
TABLE OF CONTENTS
Page
1. THE MERGER.............................................................5
1.1 Delivery and Filing of Articles of Merger.......................5
1.2 Effective Time of the Merger....................................5
1.3 Certificate of Incorporation, By-laws and Board of
Directors of Surviving Corporation..............................6
1.4 Certain Information With Respect to the Capital Stock
of the COMPANY, CSI and NEWCO...................................7
1.5 Effect of Merger................................................7
2. CONVERSION OF STOCK....................................................8
2.1 Manner of Conversion............................................8
3. DELIVERY OF MERGER CONSIDERATION.......................................9
4. CLOSING...............................................................10
5. REPRESENTATIONS AND WARRANTIES OF COMPANY
AND STOCKHOLDERS...............................................11
(A) Representations and Warranties of
COMPANY and STOCKHOLDERS.........................11
5.1 Due Organization...............................................12
5.2 Authorization..................................................12
5.3 Capital Stock of the COMPANY...................................13
5.4 Transactions in Capital Stock, Organization Accounting.........13
5.5 No Bonus Shares................................................14
5.6 Subsidiaries...................................................14
5.7 Predecessor Status; etc........................................14
5.8 Spin-off by the COMPANY........................................14
5.9 Financial Statements...........................................14
5.10 Liabilities and Obligations....................................15
5.11 Accounts and Notes Receivable..................................16
5.12 Permits and Intangibles........................................16
5.13 Environmental Matters..........................................17
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5.14 Personal Property..............................................18
5.15 Significant Customers; Material Contracts and
Commitments....................................................18
5.16 Real Property..................................................19
5.17 Insurance......................................................20
5.18 Compensation; Employment Agreements; Organized
Labor Matters..................................................20
5.19 Employee Plans.................................................21
5.20 Compliance with ERISA..........................................22
5.21 Conformity with Law; Litigation................................23
5.22 Taxes..........................................................24
5.23 No Violations..................................................25
5.24 Government Contracts...........................................25
5.25 Absence of Changes.............................................25
5.26 Deposit Accounts; Powers of Attorney...........................27
5.27 Validity of Obligations........................................27
5.28 Relations with Governments.....................................28
5.29 Disclosure.....................................................28
5.30 Prohibited Activities..........................................29
(B)Representations and Warranties of STOCKHOLDERS.......29
5.31 Authority; Ownership...........................................29
5.32 Preemptive Rights..............................................30
5.33 No Intention to Dispose of CSI Stock...........................30
6. REPRESENTATIONS OF CSI and NEWCO......................................30
6.1 Due Organization...............................................31
6.2 Authorization..................................................31
6.3 Capital Stock of CSI and NEWCO.................................31
6.4 Transactions in Capital Stock, Organization Accounting.........31
6.5 Subsidiaries...................................................32
6.6 Financial Statements...........................................32
6.7 Liabilities and Obligations....................................32
6.8 Conformity with Law; Litigation................................33
6.9 No Violations..................................................33
6.10 Validity of Obligations........................................34
6.11 CSI Stock......................................................34
6.12 No Side Agreements.............................................34
6.13 Business; Real Property; Material Agreements...................34
6.14 Taxes..........................................................35
6.15 Absence of Changes.............................................35
6.16 Validity of Obligations........................................36
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6.17 Disclosure.....................................................37
7. COVENANTS PRIOR TO CLOSING............................................37
7.1 Access and Cooperation; Due Diligence..........................37
7.2 Conduct of Business Pending Closing............................38
7.3 Prohibited Activities..........................................39
7.4 No Shop........................................................40
7.5 Notice to Bargaining Agents....................................41
7.6 Agreements.....................................................41
7.7 Notification of Certain Matters................................41
7.8 Amendment of Schedules.........................................42
7.9 Cooperation in Preparation of Registration Statement...........43
7.10 Final Financial Statements.....................................44
7.11 Further Assurances.............................................44
7.12 Authorized Capital.............................................44
7.13 Compliance with the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976 (the "▇▇▇▇-▇▇▇▇▇ Act")................45
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
AND COMPANY...........................................................45
8.1 Representations and Warranties; Performance of
Obligations....................................................46
8.2 Satisfaction...................................................46
8.3 No Litigation..................................................46
8.4 Opinion of Counsel.............................................47
8.5 Registration Statement.........................................47
8.6 Consents and Approvals.........................................47
8.7 Good Standing Certificates.....................................47
8.8 No Material Adverse Change.....................................47
8.9 Closing of IPO.................................................47
8.10 Secretary's Certificate........................................48
8.11 Employment Agreements..........................................48
8.12 Tax Matters....................................................48
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF CSI AND NEWCO..................48
9.1 Representations and Warranties; Performance of
Obligations....................................................49
9.2 No Litigation..................................................49
9.3 Secretary's Certificate........................................49
9.4 No Material Adverse Effect.....................................49
9.5 STOCKHOLDERS' Release..........................................50
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9.6 Satisfaction...................................................50
9.7 Termination of Related Party Agreements........................50
9.8 Opinion of Counsel.............................................50
9.9 Consents and Approvals.........................................50
9.10 Good Standing Certificates.....................................51
9.11 Registration Statement.........................................51
9.12 Employment Agreements..........................................51
9.13 Closing of IPO.................................................51
9.14 FIRPTA Certificate.............................................51
10. COVENANTS OF CSI AND THE STOCKHOLDERS AFTER CLOSING...................51
10.1 Release From Guarantees; Repayment of Certain
Obligations....................51
10.2 Preservation of Tax and Accounting Treatment...................52
10.3 Preparation and Filing of Tax Returns..........................52
10.4 Directors......................................................53
10.5 Preservation of Employee Benefit Plans.........................53
10.6 Dividends......................................................54
11. INDEMNIFICATION.......................................................54
11.1 General Indemnification by the STOCKHOLDERS....................54
11.2 Indemnification by CSI.........................................55
11.3 Third Person Claims............................................56
11.4 Exclusive Remedy...............................................58
11.5 Limitations on Indemnification.................................58
12. TERMINATION OF AGREEMENT..............................................59
12.1 Termination....................................................59
12.2 Liabilities in Event of Termination............................60
13. NONCOMPETITION........................................................60
13.1 Prohibited Activities..........................................60
13.2 Damages........................................................61
13.3 Reasonable Restraint...........................................62
13.4 Severability; Reformation......................................62
13.5 Independent Covenant...........................................62
13.6 Materiality....................................................62
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................62
14.1 STOCKHOLDERS...................................................63
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14.2 CSI AND NEWCO..................................................63
14.3 Damages........................................................64
14.4 Survival.......................................................65
15. TRANSFER RESTRICTIONS.................................................65
15.1 Transfer Restrictions..........................................65
16. FEDERAL SECURITIES ACT REPRESENTATIONS................................66
16.1 Compliance with Law............................................66
16.2 Economic Risk; Sophistication..................................66
17. REGISTRATION RIGHTS...................................................67
17.1 Piggyback Registration Rights..................................67
17.2 Demand Registration Rights.....................................68
17.3 Registration Procedures........................................69
17.4 Underwriting Agreement.........................................69
17.5 Availability of Rule 144.......................................70
17.6 Rule 144 Reporting.............................................70
18. GENERAL...............................................................70
18.1 Cooperation....................................................71
18.2 Successors and Assigns.........................................71
18.3 Entire Agreement...............................................71
18.4 Counterparts...................................................71
18.5 Brokers and Agents.............................................72
18.6 Expenses.......................................................72
18.7 Notices........................................................72
18.8 Governing Law..................................................74
18.9 Survival of Representations and Warranties.....................74
18.10 Exercise of Rights and Remedies................................74
18.11 Time...........................................................74
18.12 Reformation and Severability...................................74
18.13 Remedies Cumulative............................................75
18.14 Captions.......................................................75
18.15 Amendments and Waivers.........................................75
ANNEXES
ANNEX I - FORM OF ARTICLES OF MERGER
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ANNEX II - CERTIFICATE OF INCORPORATION AND BY-LAWS OF CSI AND
NEWCO
ANNEX III - CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV - STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
ANNEX V - STOCKHOLDERS AND STOCK OWNERSHIP OF CSI
ANNEX VI - FORM OF OPINION OF COUNSEL TO CSI
ANNEX VII - FORM OF OPINION OF COUNSEL TO COMPANY AND
STOCKHOLDERS
ANNEX VIII - FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
the 18th day of March, 1997, by and among COMFORT SYSTEMS USA, Inc., a Delaware
corporation ("CSI"), FREEWAY ACQUISITION CORP., a Delaware corporation
("NEWCO"), FREEWAY HEATING & AIR CONDITIONING, INC., a Utah corporation (the
"COMPANY"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the "STOCKHOLDERS"). The STOCKHOLDERS are all the
stockholders of the COMPANY.
WHEREAS, NEWCO is a corporation duly organized and existing under
the laws of the State of Delaware, having been incorporated on March 4,
1997, solely for the purpose of completing the transactions set forth
herein, and is a wholly-owned subsidiary of CSI, a corporation organized
and existing under the laws of the State of Delaware;
WHEREAS, the respective Boards of Directors of NEWCO and the
COMPANY (which together are hereinafter collectively referred to as
"Constituent Corporations") deem it advisable and in the best interests
of the Constituent Corporations and their respective stockholders that
NEWCO merge with and into the COMPANY pursuant to this Agreement and the
applicable provisions of the laws of the States of Delaware and Utah;
WHEREAS, CSI is entering into other separate agreements
substantially similar to this Agreement (the "Other Agreements"), each
of which is entitled "Agreement and Plan of Organization," with each of
the other Founding Companies (as defined herein) and their respective
stockholders in order to acquire additional heating, ventilating, air
conditioning and related services companies;
WHEREAS, this Agreement, the Other Agreements and the IPO of CSI
Stock constitute the "CSI Plan of Organization;"
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the
stockholders of CSI, each of the Other Founding Companies and each of
the subsidiaries of
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CSI that are parties to the Other Agreements have approved and adopted
the CSI Plan of Organization as an integrated plan pursuant to which the
STOCKHOLDERS and the stockholders of each of the other Founding
Companies will transfer the capital stock of each of the Founding
Companies to CSI and the STOCKHOLDERS and the stockholders of each of
the other Founding Companies and the public will acquire the stock of
CSI (but not cash or other property) as a tax-free transfer of property
under Section 351 of the Internal Revenue Code of 1986, as amended;
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Board of Directors of
the COMPANY has approved this Agreement as part of the CSI Plan of
Organization in order to transfer the capital stock of the COMPANY to
CSI;
WHEREAS, unless the context otherwise requires, capitalized terms
used in this Agreement or in any schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of
this Agreement: "1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the COMPANY, any subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean NEWCO and each of the other Delaware
companies wholly-owned by CSI prior to the Funding and Consummation Date.
"Affiliates" has the meaning set forth in Section 5.8.
"Articles of Merger" shall mean those Articles or Certificates of Merger
with respect to the Merger substantially in the forms attached as Annex I hereto
or with such other changes therein as may be required by applicable state laws.
"Balance Sheet Date" shall mean December 31, 1996.
"Closing" has the meaning set forth in Section 4.
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"Closing Date" has the meaning set forth in Section 4.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second
recital of this Agreement.
"Effective Time of the Merger" shall mean the time as of which the
Merger becomes effective, which shall, in any case, occur on the Funding and
Consummation Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" means:
Accurate Air Systems, Inc., a Texas corporation,
Atlas Comfort Services USA, Inc., a Texas corporation
(formerly Atlas Interest, Inc.),
Contract Service, Inc., a Utah corporation,
Eastern Heating & Cooling, Inc., a New York corporation, and
Eastern Refrigeration
Co., Inc., a New York corporation,
Freeway Heating & Air Conditioning, Inc., a Utah corporation,
Quality Air Heating & Cooling, Inc., a Michigan corporation,
Seasonair, Inc., a Maryland corporation, Standard Heating & Air
Conditioning Company, Inc., an Alabama corporation, ▇.▇. ▇▇▇▇▇▇▇▇
Company, Inc., a Tennessee corporation, and ▇▇▇▇▇▇▇▇ Service,
Inc., A Tennessee corporation, Tech Heating and Air Conditioning,
Inc., an Ohio corporation, and Tech
Mechanical, Inc., an Ohio corporation,
Tri-City Mechanical, Inc., an Arizona corporation, and
Western Building Services, Inc., a Colorado corporation.
"Funding and Consummation Date" has the meaning set forth in
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Section 4.
"CSI" has the meaning set forth in the first paragraph of this Agreement
"CSI Charter Documents" has the meaning set forth in Section 6.1.
"CSI Stock" means the common stock, par value $.01 per share, of CSI.
"IPO" means the initial public offering of CSI Stock pursuant to the
Registration Statement as referenced in Section 9.13.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.23.
"Merger" means the merger of NEWCO with and into the COMPANY pursuant to
this Agreement and the applicable provisions of the laws of the State of
Delaware and other applicable state laws.
"NEWCO" has the meaning set forth in the first paragraph of this
Agreement.
"NEWCO STOCK" means the common stock, par value $.01 per share, of
NEWCO.
"Other Founding Companies" means all of the Founding Companies other
than the Company.
"Plans" has the meaning set forth in Section 5.19.
"Pricing" means the date of determination by CSI and the Underwriters of
the public offering price of the shares of CSI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Registration Statement" means that certain registration statement on
Form S-1 to be filed with the SEC covering the shares of CSI Stock to be issued
in the IPO.
"Relevant Group" means the COMPANY and any affiliated, combined,
consolidated, unitary or similar group of which the COMPANY is or was a member.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
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"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"Surviving Corporation" shall mean the COMPANY as the surviving party in
the Merger.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts,net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, or other taxes, assessments, duties,
fees, levies or other governmental charges of any nature whatever, whether
disputed or not, together with any interest, penalties, additions to tax or
additional amounts with respect thereto.
"Underwriters" means the prospective underwriters identified in the
Registration Statement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements,representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent
Corporations will cause the Articles of Merger to be signed, verified and filed
with the Secretary of State of the State of Delaware and the Secretary of State
of the State of Utah and stamped receipt copies of each such filing to be
delivered to CSI on or before the Funding and Consummation Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger,
NEWCO shall be merged with and into the COMPANY in accordance with the Articles
of Merger, the separate existence of NEWCO shall cease, the COMPANY shall be the
surviving party in the Merger and the
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COMPANY is sometimes hereinafter referred to as the Surviving Corporation. The
Merger will be effected in a single transaction.
1.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of the COMPANY then in
effect shall be the Certificate of Incorporation of the Surviving
Corporation until changed as provided by law;
(ii) the By-laws of NEWCO then in effect shall become the By-laws
of the Surviving Corporation; and subsequent to the Effective Time of
the Merger, such By-laws shall be the By-laws of the Surviving
Corporation until they shall thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of the persons who are on the Board of Directors of the COMPANY
immediately prior to the Effective Time of the Merger, provided that
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ shall be elected as a director of the Surviving
Corporation effective as of the Effective Time of the Merger; the Board
of Directors of the Surviving Corporation shall hold office subject to
the provisions of the laws of the State of Utah and of the Certificate
of Incorporation and By-laws of the Surviving Corporation; and
(iv) the officers of the COMPANY immediately prior to the
Effective Time of the Merger shall continue as the officers of the
Surviving Corporation in the same capacity or capacities, and effective
upon the Effective Time of the Merger ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ shall be
appointed as a vice president of the Surviving Corporation and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇ shall be appointed as an Assistant Secretary of the
Surviving Corporation, each of such officers to serve, subject to the
provisions of the Certificate of Incorporation and By-laws of the
Surviving Corporation, until his or her successor is duly elected and
qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY, CSIAND NEWCO. The respective designations and numbers of outstanding
shares and voting rights of
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each class of outstanding capital stock of the COMPANY, CSI and NEWCO as of the
date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and
outstanding capital stock of the COMPANY is as set forth on Schedule 5.3
hereto;
(ii) immediately prior to the Funding and Consummation Date, the
authorized capital stock of CSI will consist of 50,000,000 shares of CSI
Stock, of which the number of issued and outstanding shares will be set
forth in the Registration Statement, and 5,000,000 shares of preferred
stock, $.01 par value, of which no shares will be issued and outstanding
and 2,969,912 shares of Restricted Voting Common Stock, $.01 par value,
all of which will be issued and outstanding except as otherwise set
forth in the Registration Statement; and
(iii) as of the date of this Agreement, the authorized capital
stock of NEWCO consists of 1,000 shares of NEWCO Stock, of which one
hundred (100) shares are issued and outstanding. 1.5 EFFECT OF MERGER.
At the Effective Time of the Merger, the effect of the Merger shall
be as provided in the applicable provisions of the General Corporation Law of
the State of Delaware (the "Delaware GCL") and the law of the State of Utah.
Except as herein specifically set forth, the identity, existence, purposes,
powers, objects, franchises, privileges, rights and immunities of the COMPANY
shall continue unaffected and unimpaired by the Merger and the corporate
franchises, existence and rights of NEWCO shall be merged with and into the
COMPANY, and the COMPANY, as the Surviving Corporation, shall be fully vested
therewith. At the Effective Time of the Merger, the separate existence of NEWCO
shall cease and, in accordance with the terms of this Agreement, the Surviving
Corporation shall possess all the rights, privileges, immunities and franchises,
of a public, as well as of a private, nature, and all property, real, personal
and mixed, and all debts due on whatever account, including subscriptions to
shares, and all taxes, including those due and owing and those accrued, and all
other choses in action, and all and every other interest of or belonging to or
due to the COMPANY and NEWCO shall be taken and deemed to be transferred
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to, and vested in, the Surviving Corporation without further act or deed; and
all property, rights and privileges, powers and franchises and all and every
other interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of the COMPANY and NEWCO; and the title to any real
estate, or interest therein, whether by deed or otherwise, under the laws of the
state of incorporation vested in the COMPANY and NEWCO, shall not revert or be
in any way impaired by reason of the Merger. Except as otherwise provided
herein, the Surviving Corporation shall thenceforth be responsible and liable
for all the liabilities and obligations of the COMPANY and NEWCO and any claim
existing, or action or proceeding pending, by or against the COMPANY or NEWCO
may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of the COMPANY or NEWCO shall be impaired by the
Merger, and all debts, liabilities and duties of the COMPANY and NEWCO shall
attach to the Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock,
issued and outstanding immediately prior to the Effective Time of the Merger,
respectively, into shares of (x) CSI Stock and (y) common stock of the Surviving
Corporation, respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the
Merger and without any action on the part of the holder thereof,
automatically shall be deemed to represent (1) the right to receive the
number of shares of CSI Stock set forth on Annex III hereto with respect
to such
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holder and (2) the right to receive the amount of cash set forth on
Annex III hereto with respect to such holder;
(ii) all shares of COMPANY Stock that are held by the COMPANY as
treasury stock shall be canceled and retired and no shares of CSI Stock
or other consideration shall be delivered or paid in exchange therefor;
and
(iii) each share of NEWCO Stock issued and outstanding
immediately prior to the Effective Time of the Merger, shall, by virtue
of the Merger and without any action on the part of CSI, automatically
be converted into one fully paid and non-assessable share of common
stock of the Surviving Corporation which shall constitute all of the
issued and outstanding shares of common stock of the Surviving
Corporation immediately after the Effective Time of the Merger. All CSI
Stock received by the STOCKHOLDERS pursuant to this Agreement shall,
except
for restrictions on resale or transfer described in Sections 15 and 16 hereof,
have the same rights as all the other shares of outstanding CSI Stock by reason
of the provisions of the Certificate of Incorporation of CSI or as otherwise
provided by the Delaware GCL. All voting rights of such CSI Stock received by
the STOCKHOLDERS shall be fully exercisable by the STOCKHOLDERS and the
STOCKHOLDERS shall not be deprived nor restricted in exercising those rights. At
the Effective Time of the Merger, CSI shall have no class of capital stock
issued and outstanding other than the CSI Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 On the Funding and Consummation Date the STOCKHOLDERS, who are the
holders of all outstanding certificates representing shares of COMPANY Stock,
shall, upon surrender of such certificates, receive the respective number of
shares of CSI Stock and the amount of cash set forth on Annex III hereto, said
cash to be payable by certified check.
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3.2 The STOCKHOLDERS shall deliver to CSI at the Closing the
certificates representing COMPANY Stock, duly endorsed in blank by the
STOCKHOLDERS, or accompanied by blank stock powers, and with all necessary
transfer tax and other revenue stamps, acquired at the STOCKHOLDERS' expense,
affixed and canceled. The STOCKHOLDERS agree promptly to cure any deficiencies
with respect to the endorsement of the stock certificates or other documents of
conveyance with respect to such COMPANY Stock or with respect to the stock
powers accompanying any COMPANY Stock.
4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary
to prepare to (i) effect the Merger (including, if permitted by applicable state
law, the filing with the appropriate state authorities of the Articles of Merger
which shall become effective at the Effective Time of the Merger) and (ii)
effect the conversion and delivery of shares referred to in Section 3 hereof;
provided, that such actions shall not include the actual completion of the
Merger or the conversion and delivery of the shares and certified check(s)
referred to in Section 3 hereof, each of which actions shall only be taken upon
the Funding and Consummation Date as herein provided. In the event that there is
no Funding and Consummation Date and this Agreement terminates, CSI hereby
covenants and agrees to do all things required by Delaware law and all things
which counsel for the COMPANY advise CSI are required by applicable laws of the
State of Utah in order to rescind the merger effected by the filing of the
Articles of Merger as described in this Section. The taking of the actions
described in clauses (i) and (ii) above (the "Closing") shall take place on the
closing date (the "Closing Date") at the offices of Bracewell & ▇▇▇▇▇▇▇▇▇,
L.L.P., South Tower Pennzoil Place, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇. On the Funding and Consummation Date (x) the Articles of Merger shall be
or shall have been filed with the appropriate state authorities so that they
shall be or, as of 8:00 a.m. EASTERN STANDARD TIME on the Funding and
Consummation Date, shall become effective and the Merger shall thereby be
effected, (y) all transactions contemplated
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by this Agreement, including the conversion and delivery of shares, the delivery
of a certified check or checks in an amount equal to the cash portion of the
consideration which the STOCKHOLDERS shall be entitled to receive pursuant to
the Merger referred to in Section 3 hereof and (z) the closing with respect to
the IPO shall occur and be deemed to be completed. The date on which the actions
described in the preceding clauses (x), (y) and (z) occurs shall be referred to
as the "Funding and Consummation Date." Except as otherwise provided in Section
12 hereof, during the period from the Closing Date to the Funding and
Consummation Date, this Agreement may only be terminated by the parties if the
underwriting agreement in respect of the IPO is terminated pursuant to the terms
of such agreement. This Agreement shall in any event terminate if the Funding
and Consummation Date has not occurred within 15 business days of the Closing
Date. Time is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY
AND STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
Each of the COMPANY and the STOCKHOLDERS jointly and severally represent
and warrant that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Closing and the Funding and Consummation
Date, and that such representations and warranties shall survive the Funding and
Consummation Date for a period of twelve months (the last day of such period
being the "Expiration Date"), except that (i) the warranties and representations
set forth in Section 5.22 hereof shall survive until such time as the
limitations period has run for all tax periods ended on or prior to the Funding
and Consummation Date, which shall be deemed to be the Expiration Date for
Section 5.22 and (ii) solely for purposes of determining whether a claim for
indemnification under Section 11.1(iii) hereof has been made on a timely basis,
and solely to the extent that in connection with the IPO, CSI actually incurs
liability under the 1933 Act, the 1934 Act, or any other Federal or state
securities laws, the representations and warranties set forth herein shall
survive until the
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expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for such purposes. For purposes of this Section 5, the term
COMPANY shall mean and refer to the COMPANY and all of its subsidiaries, if any.
5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and has the requisite power and authority to carry on its
business as it is now being conducted. The COMPANY is duly qualified to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, except (i) as set forth on Schedule 5.1 or (ii) where the failure to
be so authorized or qualified would not have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the COMPANY taken as a whole (as used herein with respect to the COMPANY, or
with respect to any other person, a "Material Adverse Effect"). Schedule 5.1
sets forth the jurisdiction in which the COMPANY is incorporated and contains a
list of all jurisdictions in which the COMPANY is authorized or qualified to do
business. True, complete and correct copies of the Certificate of Incorporation
and By-laws, each as amended, of the COMPANY (the "Charter Documents") are all
attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore
made available to CSI, are correct and complete in all material respects. There
are no minutes in the possession of the COMPANY or the STOCKHOLDERS which have
not been made available to CSI, and all of such minutes are correct and complete
in all respects. The most recent minutes of the COMPANY, which are dated no
earlier than ten business days prior to the date hereof, affirm and ratify all
prior acts of the COMPANY, and of its officers and directors on behalf of the
COMPANY.
5.2 AUTHORIZATION. (i) The representatives of the COMPANY executing this
Agreement have the authority to enter into and bind the COMPANY to the terms of
this Agreement and (ii) the COMPANY has the full legal right, power and
authority to enter into this Agreement and the Merger, subject to any required
approval of the shareholders and the Board of Directors of the Company described
on Schedule 5.2, executed copies of which are attached thereto.
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5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
COMPANY is as set forth on Schedule 5.3. All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS in the
amounts set forth in Annex IV and further, except as set forth on Schedule 5.3,
are owned free and clear of all liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind. All of the
issued and outstanding shares of the capital stock of the COMPANY have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by the STOCKHOLDERS and further, such shares were
offered, issued, sold and delivered by the COMPANY in compliance with all
applicable state and Federal laws concerning the issuance of securities.
Further, none of such shares were issued in violation of any preemptive rights
of any past or present stockholder.
5.4 TRANSACTIONS IN CAPITAL STOCK, ORGANIZATION ACCOUNTING. Except as
set forth on Schedule 5.4, the COMPANY has not acquired any COMPANY Stock since
January 1, 1995. Except as set forth on Schedule 5.4, (i) no option, warrant,
call, conversion right or commitment of any kind exists which obligates the
COMPANY to issue any of its authorized but unissued capital stock; (ii) the
COMPANY has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof; and (iii) neither
the voting stock structure of the COMPANY nor the relative ownership of shares
among any of its respective stockholders has been altered or changed in
contemplation of the Merger and/or the CSI Plan of Organization. Schedule 5.4
also includes complete and accurate copies of all stock option or stock purchase
plans, including a list of all outstanding options, warrants or other rights to
acquire shares of the COMPANY's stock.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses in
contemplation of the Merger or the CSI Plan of Organization.
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5.6 SUBSIDIARIES. Except as set forth on Schedule 5.6, the COMPANY has
no subsidiaries. Except as set forth in Schedule 5.6 and except for any
corporations or entities with respect to which the COMPANY owns less than 1% of
the issued and outstanding stock, the COMPANY does not presently own, of record
or beneficially, or control, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity interest in any
corporation, association or business entity nor is the COMPANY, directly or
indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth in Schedule 5.7 is a listing of
all names of all predecessor companies of the COMPANY, including the names of
any entities acquired by the COMPANY (by stock purchase, merger or otherwise) or
owned by the COMPANY or from whom the COMPANY previously acquired material
assets, in any case, from the earliest date upon which any STOCKHOLDER acquired
his or her stock in any COMPANY. Except as disclosed on Schedule 5.7, the
COMPANY has not been, within such period of time, a subsidiary or division of
another corporation or a part of an acquisition which was later rescinded.
5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
COMPANY or any other person or entity that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the COMPANY ("Affiliates") since January 1, 1995.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of
the following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's unaudited Balance Sheets as of December 31, 1996 and
March 31, 1996, and March 31, 1995 and Statements of Income, Cash Flows and
Retained Earnings for year ended March 31, 1995 and unaudited statements of
Income and Cash Flows for the fiscal years ended March 31, 1995 and 1996 and
December 31, 1996 (December 31, 1996 being hereinafter referred to as the
"Balance Sheet Date"). Such Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as noted
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thereon or on Schedule 5.9). Except as set forth on Schedule 5.9, such Balance
Sheets as of December 31, 1996, and March 31, 1995 present fairly in all
material respects the financial position of the COMPANY as of the dates
indicated thereon, and such Statements of Income, Cash Flows and Retained
Earnings and Statement of Income present fairly in all material respects the
results of operations for the periods indicated thereon.
5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to CSI an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date
of (i) all material liabilities of the COMPANY which are not reflected on the
balance sheet of the COMPANY at the Balance Sheet Date or otherwise reflected in
the COMPANY Financial Statements at the Balance Sheet Date, which by their
nature would be required in accordance with GAAP to be reflected in the balance
sheet, and (ii) all loan agreements, indemnity or guaranty agreements, bonds,
mortgages, liens, pledges or other security agreements. Except as set forth on
Schedule 5.10, since the Balance Sheet Date the COMPANY has not incurred any
material liabilities of any kind, character and description, whether accrued,
absolute, secured or unsecured, contingent or otherwise, other than liabilities
incurred in the ordinary course of business. The COMPANY has also delivered to
CSI on Schedule 5.10, in the case of those contingent liabilities related to
pending or threatened litigation, or other liabilities which are not fixed or
otherwise accrued or reserved, a good faith and reasonable estimate of the
maximum amount which the COMPANY reasonably expects will be payable. For each
such contingent liability or liability for which the amount is not fixed or is
contested, the COMPANY has provided to CSI the following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought;
and
(c) name of claimant and all other parties to the claim,
suit or proceeding;
(ii) the name of each court or agency before which such claim,
suit or proceeding is pending; and
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(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith and reasonable estimate of the maximum amount,
if any, which
is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of
this Agreement be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to CSI an
accurate list (which is set forth on Schedule 5.11) of the accounts and notes
receivable of the COMPANY, as of the Balance Sheet Date, including any such
amounts which are not reflected in the balance sheet as of the Balance Sheet
Date, and including receivables from and advances to employees and the
STOCKHOLDERS. Except to the extent reflected on Schedule 5.11, such accounts,
notes and other receivables are collectible in the amounts shown on Schedule
5.11, net of reserves reflected in the balance sheet as of the Balance Sheet
Date.
5.12 PERMITS AND INTANGIBLES. The COMPANY and its employees hold all
licenses, franchises, permits and other governmental authorizations the absence
of any of which could have a Material Adverse Effect on the Company's business
and the COMPANY has delivered to CSI an accurate list and summary description
(which is set forth on Schedule 5.12) of all such licenses, franchises, permits
and other governmental authorizations, including permits, titles (including
motor vehicle titles and current registrations), fuel permits, licenses,
franchises, certificates, trademarks, trade names, patents, patent applications
and copyrights owned or held by the COMPANY or any of its employees (including
interests in software or other technology systems, programs and intellectual
property) (it being understood and agreed that a list of all environmental
permits and other environmental approvals is set forth on Schedule 5.13). To the
knowledge of the COMPANY, the licenses, franchises, permits and other
governmental authorizations listed on Schedules 5.12 and 5.13 are valid, and the
COMPANY has not received any notice that any governmental authority intends to
cancel, terminate or not renew any such license, franchise, permit or other
governmental authorization. The COMPANY has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the licenses, franchises, permits and
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other governmental authorizations listed on Schedules 5.12 and 5.13 and is not
in violation of any of the foregoing except where such non-compliance or
violation would not have a Material Adverse Effect on the COMPANY. Except as
specifically provided in Schedule 5.12, the transactions contemplated by this
Agreement will not result in a default under or a breach or violation of, or
adversely affect the rights and benefits afforded to the COMPANY by, any such
licenses, franchises, permits or government authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, and
except where any failure to comply or action would not have a Material Adverse
Effect, (i) the COMPANY has complied with and is in compliance with all Federal,
state, local and foreign statutes (civil and criminal), laws, ordinances,
regulations, rules, notices, permits, judgments, orders and decrees applicable
to any of them or any of their respective properties, assets, operations and
businesses relating to environmental protection (collectively "Environmental
Laws") including, without limitation, Environmental Laws relating to air, water,
land and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Wastes and Hazardous Substances including petroleum and
petroleum products (as such terms are defined in any applicable Environmental
Law); (ii) the COMPANY has obtained and adhered to all necessary permits and
other approvals necessary to treat, transport, store, dispose of and otherwise
handle Hazardous Wastes and Hazardous Substances, a list of all of which permits
and approvals is set forth on Schedule 5.13, and have reported to the
appropriate authorities, to the extent required by all Environmental Laws, all
past and present sites owned and operated by the COMPANY where Hazardous Wastes
or Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (iii) there have been no releases or threats of releases (as defined in
Environmental Laws) at, from, in or on any property owned or operated by the
COMPANY except as permitted by Environmental Laws; (iv) the COMPANY knows of no
on-site or off-site location to which the COMPANY has transported or disposed of
Hazardous Wastes and Hazardous Substances or arranged for the transportation of
Hazardous Wastes and Hazardous Substances, which site is the subject of any
Federal, state, local
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or foreign enforcement action or any other investigation which is reasonably
likely to lead to any claim against the COMPANY, CSI or NEWCO for any clean-up
cost, remedial work, damage to natural resources, property damage or personal
injury, including, but not limited to, any claim under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended; and
(v) to the knowledge of the COMPANY has no contingent liability in connection
with any release of any Hazardous Waste or Hazardous Substance into the
environment.
5.14 PERSONAL PROPERTY. The COMPANY has delivered to CSI an accurate
list (which is set forth on Schedule 5.14) of (x) all personal property included
(or that will be included) in "depreciable plant, property and equipment" on the
balance sheet of the COMPANY, (y) all other personal property owned by the
COMPANY with an individual value in excess of $50,000 (i) as of the Balance
Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all leases and
agreements in respect of personal property, including, in the case of each of
(x), (y) and (z), (1) true, complete and correct copies of all such leases and
(2) an indication as to which assets are currently owned, or were formerly
owned, by STOCKHOLDERS, relatives of STOCKHOLDERS, or Affiliates of the COMPANY.
Except as set forth on Schedule 5.14, (i) all material personal property used by
the COMPANY in its business is either owned by the COMPANY or leased by the
COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the personal
property listed on Schedule 5.14 is in good working order and condition,
ordinary wear and tear excepted and (iii) all leases and agreements included on
Schedule 5.14 are in full force and effect and constitute valid and binding
agreements of the parties (and their successors) thereto in accordance with
their respective terms.
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. The
COMPANY has delivered to CSI an accurate list (which is set forth on Schedule
5.15) of (i) all significant customers, it being understood and agreed that a
"significant customer," for purposes of this Section 5.15, means a customer (or
person or entity) representing 5% or more of the COMPANY's annual revenues as of
the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of
the
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COMPANY's significant customers have canceled or substantially reduced or, to
the knowledge of the COMPANY, are currently attempting or threatening to cancel
a contract or substantially reduce utilization of the services provided by the
COMPANY.
The COMPANY has listed on Schedule 5.15 all material contracts,
commitments and similar agreements to which the COMPANY is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with significant customers, joint venture or partnership agreements, contracts
with any labor organizations, strategic alliances and options to purchase land),
other than agreements listed on Schedule 5.10, 5.14 or 5.16, (a) in existence as
of the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and
in each case has delivered true, complete and correct copies of such agreements
to CSI. The COMPANY has complied with all material commitments and obligations
pertaining to it, and is not in default under any contracts or agreements listed
on Schedule 5.15 and no notice of default under any such contract or agreement
has been received. The COMPANY has also indicated on Schedule 5.15 a summary
description of all plans or projects involving the opening of new operations,
expansion of existing operations, the acquisition of any personal property,
business or assets requiring, in any event, the payment of more than $50,000 by
the COMPANY.
5.16 REAL PROPERTY. Schedule 5.16 includes a list of all real property
owned or leased by the COMPANY at the date hereof and all other real property,
if any, used by the COMPANY in the conduct of its business. Any such real
property owned by the COMPANY will be sold by the COMPANY and leased back by the
COMPANY on terms no less favorable to the COMPANY than those available from an
unaffiliated party and otherwise reasonably acceptable to CSI at or prior to the
Closing Date. True, complete and correct copies of all leases and agreements in
respect of such real property leased by the COMPANY are attached to Schedule
5.16, and an indication as to which such properties, if any, are currently
owned, or were formerly owned, by STOCKHOLDERS or affiliates of the COMPANY or
STOCKHOLDERS is included in Schedule 5.16. Except as set forth on Schedule 5.16,
all of such leases included on Schedule 5.16 are in full force and effect and
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constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their respective terms.
5.17 INSURANCE. The COMPANY has delivered to CSI (i) an accurate list as
of the Balance Sheet Date of all insurance policies carried by the COMPANY, (ii)
an accurate list of all insurance loss runs or workers compensation claims
received for the past three (3) policy years and (iii) true, complete and
correct copies of all insurance policies currently in effect. Such insurance
policies evidence all of the insurance that the COMPANY is required to carry
pursuant to all of its contracts and other agreements and pursuant to all
applicable laws. All of such insurance policies are currently in full force and
effect and shall remain in full force and effect through the Funding and
Consummation Date. Since January 1, 1994, no insurance carried by the COMPANY
has been canceled by the insurer and the COMPANY has not been denied coverage.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The
COMPANY has delivered to CSI an accurate list (which is set forth on Schedule
5.18) showing all officers, directors and key employees of the COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons as of (i) the
Balance Sheet Date and (ii) the date hereof. The COMPANY has provided to CSI
true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.18. Since the Balance Sheet Date, there have been no
increases in the compensation payable or any special bonuses to any officer,
director, key employee or other employee, except ordinary salary increases
implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.18, (i) the COMPANY is not
bound by or subject to (and none of its respective assets or properties is bound
by or subject to) any arrangement with any labor union, (ii) no employees of the
COMPANY are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the COMPANY, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the
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COMPANY's knowledge, threatened labor dispute involving the COMPANY and any
group of its employees nor has the COMPANY experienced any labor interruptions
over the past three years.
The COMPANY believes its relationship with employees to be good.
5.19 EMPLOYEE PLANS. The STOCKHOLDERS have delivered to CSI an accurate
schedule (Schedule 5.19) showing all employee benefit plans of COMPANY
(including COMPANY's Subsidiaries), including all employment agreements and
other agreements or arrangements containing "golden parachute" or other similar
provisions, and deferred compensation agreements, together with true, complete
and correct copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 5.19,
COMPANY (including the COMPANY's Subsidiaries) does not sponsor, maintain or
contribute to any plan program, fund or arrangement that constitutes an
"employee pension benefit plan," nor has COMPANY or any Subsidiary any
obligation to contribute to or accrue or pay any benefits under any deferred
compensation or retirement funding arrangement on behalf of any employee or
employees (such as, for example, and without limitation, any individual
retirement account or annuity, any "excess benefit plan" (within the meaning of
Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) or any non-qualified deferred compensation arrangement). For the
purposes of this Agreement, the term "employee pension benefit plan" shall have
the same meaning as is given that term in Section 3(2) of ERISA. Neither COMPANY
nor any Subsidiary has sponsored, maintained or contributed to any employee
pension benefit plan other than the plans set forth on Schedule 5.19, nor is
COMPANY or any Subsidiary required to contribute to any retirement plan pursuant
to the provisions of any collective bargaining agreement establishing the terms
and conditions or employment of any of COMPANY's or any Subsidiary's employees.
Neither the COMPANY nor any Subsidiary is now, or can as a result of its
past activities become, liable to the Pension Benefit Guaranty Corporation or to
any multiemployer employee pension benefit plan under the provisions of Title IV
of ERISA.
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All employee benefit plans listed on Schedule 5.19 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations.
All accrued contribution obligations of COMPANY or any Subsidiary with
respect to any plan listed on Schedule 5.19 have either been fulfilled in their
entirety or are fully reflected on the balance sheet of the COMPANY as of the
Balance Sheet Date.
5.20 COMPLIANCE WITH ERISA. All such plans listed on Schedule 5.19 that
are intended to qualify (the "Qualified Plans") under Section 401(a) of the Code
are, and have been so qualified and have been determined by the Internal Revenue
Service to be so qualified, and copies of such determination letters are
included as part of Schedule 5.19 hereof. Except as disclosed on Schedule 5.20,
all reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries (including, but not
limited to, actuarial reports, audits or tax returns) have been timely filed or
distributed, and copies thereof are included as part of Schedule 5.19 hereof.
Neither STOCKHOLDERS, any such plan listed in Schedule 5.19, nor COMPANY
(including the COMPANY's Subsidiaries) has engaged in any transaction prohibited
under the provisions of Section 4975 of the Code or Section 406 of ERISA. No
such Plan listed in Schedule 5.19 has incurred an accumulated funding
deficiency, as defined in Section 412(a) of the Code and Section 302(1) of
ERISA; and COMPANY (including the COMPANY's Subsidiaries) has not incurred any
liability for excise tax or penalty due to the Internal Revenue Service nor any
liability to the Pension Benefit Guaranty Corporation. The STOCKHOLDERS further
represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval
by the Internal Revenue Service;
(ii) no such plan listed in Schedule 5.19 subject to the
provisions of Title IV of ERISA has been terminated;
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(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed
in Schedule 5.19;
(iv) COMPANY (including the COMPANY's Subsidiaries) has not
incurred liability under Section 4062 of ERISA; and
(v) No circumstances exist pursuant to which the COMPANY could
have any direct or indirect liability whatsoever (including, but not
limited to, any liability to any multiemployer plan or the PBGC under
Title IV of ERISA or to the Internal Revenue Service for any excise tax
or penalty, or being subject to any statutory lien to secure payment of
any such liability) with respect to any plan now or heretofore
maintained or contributed to by any entity other than the COMPANY that
is, or at any time was, a member of a "controlled group" (as defined in
Section 412(n)(6)(B) of the Code) that includes the COMPANY.
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 5.21 5.13, the COMPANY is not in violation of any law or regulation or
any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over any of them which would have a Material Adverse Effect; and
except to the extent set forth on Schedule 5.10 or 5.13, there are no material
claims, actions, suits or proceedings, pending or, to the knowledge of the
COMPANY, threatened against or affecting, the COMPANY, at law or in equity, or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
any of them and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. The COMPANY has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable Federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, vari ances,
rules and regulations, including all such permits, licenses, orders and other
governmental approvals set forth on Schedules 5.12 and 5.13, and is not in
violation of any of the foregoing which would have a Material Adverse Effect.
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5.22 TAXES. COMPANY (including the COMPANY's Subsidiaries) has timely
filed all requisite federal, state and other tax returns or extension requests
for all fiscal periods ended on or before the Balance Sheet Date; and except as
set forth on Schedule 5.22, there are no examinations in progress or claims
against any of them for federal, state and other taxes (including penalties and
interest) for any period or periods prior to and including the Balance Sheet
Date and no notice of any claim for taxes, whether pending or threatened, has
been received. All tax, including interest and penalties (whether or not shown
on any tax return) owed by the COMPANY, any of the COMPANY's Subsidiaries, any
member of an affiliated or consolidated group which includes or included the
COMPANY or any of the COMPANY's Subsidiaries, or with respect to any payment
made or deemed made by the COMPANY or any of the COMPANY's Subsidiaries herein
been paid. The amounts shown as accruals for taxes on the COMPANY Financial
Statements are sufficient for the payment of all taxes of the kinds indicated
(including penalties and interest) for all fiscal periods ended on or before
that date. Copies of (i) any tax examinations, (ii) extensions of statutory
limitations and (iii) the federal and local income tax returns and franchise tax
returns of COMPANY (including the COMPANY Subsidiaries) for their last three (3)
fiscal years, or such shorter period of time as any of them shall have existed,
are attached hereto as Schedule 5.22. The COMPANY has a taxable year ended
December 31 and has not made an election to retain a fiscal year other than
December 31 under Section 444 of the Code. The COMPANY's methods of accounting
have not changed in the past five years. The COMPANY is not an investment
company as defined in Section 351(e)(1) of the Code.
5.23 NO VIOLATIONS. The COMPANY is not in violation of any Charter
Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other
party thereto, is in material default under any lease, instrument, agreement,
license, or permit set forth on Schedule 5.12, 5.13, 5.14, 5.15 or 5.16, or any
other material agreement to which it is a party or by which its properties are
bound (the "Material Documents"); and, except as set forth in Schedule 5.23, (a)
the rights and benefits of the COMPANY under the Material Documents will not be
materially adversely
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affected by the transactions contemplated hereby and (b) the execution of this
Agreement and the performance of the obligations hereunder and the consummation
of the transactions contemplated hereby will not result in any material
violation or breach or constitute a default under, any of the terms or
provisions of the Material Documents or the Charter Documents. Except as set
forth on Schedule 5.23, none of the Material Documents requires notice to, or
the consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. Except as set forth on Schedule 5.23, none of the
Material Documents prohibits the use or publication by the COMPANY, CSI or NEWCO
of the name of any other party to such Material Document, and none of the
Material Documents prohibits or restricts the COMPANY from freely providing
services to any other customer or potential customer of the COMPANY, CSI, NEWCO
or any Other Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.24, the
COMPANY is not now a party to any governmental contracts subject to price
redetermination or renegotiation.
5.25 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set
forth on Schedule 5.25, there has not been:
(i) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of the
COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
the COMPANY;
(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution
in respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the
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capital stock of the COMPANY (except for dividends which COMPANY may declare and
pay pursuant to Section 10.6 hereof);
(v) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by the COMPANY to any of
its officers, directors, STOCKHOLDERS, employees, consultants or agents,
except for ordinary and customary bonuses and salary increases for
employees in accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of COMPANY to any person,
including, without limitation, the STOCKHOLDERS and their affiliates;
(viii) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to the COMPANY, including without limitation
any indebtedness or obligation of any STOCKHOLDERS or any affiliate
thereof;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets,
property or rights of the COMPANY or requiring consent of any party to
the transfer and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the ordinary course of the COMPANY's business;
(xi) any waiver of any material rights or claims of the COMPANY
(xii) any amendment or termination of any material contract,
agreement, license, permit or other right to which the COMPANY is a
party;
(xiii) any transaction by the COMPANY outside the ordinary course
of its respective businesses;
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(xiv) any cancellation or termination of a material contract with
a customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by the COMPANY
other than in the ordinary course of business.
5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to
CSI an accurate schedule (which is set forth on Schedule 5.26) as of the date of
the Agreement of:
(i) the name of each financial institution in which the COMPANY
has accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto. Schedule 5.26 also sets forth the name of each person,
corporation, firm or other entity holding a general or special power of attorney
from the COMPANY and a description of the terms of such power.
5.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the COMPANY and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of the
COMPANY and this Agreement has been duly and
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validly authorized by all necessary corporate action and is a legal, valid and
binding obligation of the COMPANY.
5.28 RELATIONS WITH GOVERNMENTS. Except for political contributions made
in a lawful manner which, in the aggregate, do not exceed $10,000 per year for
each year in which any STOCKHOLDER has been a stockholder of the COMPANY, the
COMPANY has not made, offered or agreed to offer anything of value to any
governmental official, political party or candidate for government office nor
has it otherwise taken any action which would cause the COMPANY to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended or any law of
similar effect. If political contributions made by the COMPANY have exceeded
$10,000 per year for each year in which any STOCKHOLDER has been a stockholder
of the COMPANY, each contribution in the amount of $5,000 or more shall be
described on Schedule 5.28.
5.29 DISCLOSURE. (a) This Agreement, including the Annexes and Schedules
hereto, together with the other information furnished to CSI by the COMPANY and
the STOCKHOLDERS in connection herewith, does not contain an untrue statement of
a material fact or omit to state a material fact necessary to make the
statements herein and therein, in light of the circumstances under which they
were made, not misleading; provided, however, that the foregoing does not apply
to statements contained in or omitted from any of such documents made or omitted
in reliance upon information furnished by CSI. If, prior to the 25th day after
the date of the final prospectus of CSI utilized in connection with the IPO, the
COMPANY or the STOCKHOLDERS become aware of any fact or circumstance which would
affect the accuracy of a representation or warranty of COMPANY or STOCKHOLDERS
in this Agreement, in any material respect, the COMPANY and the STOCKHOLDERS
shall immediately give notice of such fact or circumstance to CSI. However,
subject to the provisions of Section 7.8, such notification shall not relieve
either the COMPANY or the STOCKHOLDERS of their respective obligations under
this Agreement, and, subject to the provisions of Section 7.8, at the sole
option of CSI, the truth and accuracy of any and all warranties and
representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDERS
at the date of this Agreement and on the Closing Date and on the Funding and
Consummation Date, shall be a precondition to the consummation of this
transaction.
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(b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i)
that there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; (ii) that neither CSI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to the COMPANY, the
STOCKHOLDERS or any other person affiliated or associated with the COMPANY for
any failure of the Registration Statement to become effective, the IPO to occur
at a particular price or within a particular range of prices or to occur at all;
and (iii) that the decision of STOCKHOLDERS to enter into this Agreement, or to
vote in favor of or consent to the proposed Merger, has been or will be made
independent of, and without reliance upon, any statements, opinions or other
communications, or due diligence investigations which have been or will be made
or performed by any prospective Underwriter, relative to CSI or the prospective
IPO.
5.30 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.30, the
COMPANY has not, between the Balance Sheet Date and the date hereof, taken any
of the actions (Prohibited Activities) set forth in Section 7.3.
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section 7.8 hereof, shall be true at the time of
Closing and on the Funding and Consummation Date, and that the representations
and warranties set forth in Sections 5.31 and 5.32 shall survive until the first
anniversary of the Funding and Consummation Date, which shall be the Expiration
Date for purposes of Sections 5.31 and 5.32.
5.31 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement. Such STOCKHOLDER owns
beneficially and of record all of the shares of the COMPANY stock identified on
Annex IV as being owned by such
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STOCKHOLDER, and, except as set forth on Schedule 5.31, such COMPANY Stock is
owned free and clear of all liens, encumbrances and claims of every kind.
5.32 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby
waives, any preemptive or other right to acquire shares of COMPANY Stock or CSI
Stock that such STOCKHOLDER has or may have had other than rights of any
STOCKHOLDER to acquire CSI Stock pursuant to (i) this Agreement or (ii) any
option granted by CSI.
5.33 NO INTENTION TO DISPOSE OF CSI STOCK. No STOCKHOLDER is under any
binding commitment or contract to sell, exchange or otherwise dispose of shares
of CSI Stock received as described in Section 3.1.
6. REPRESENTATIONS OF CSI AND NEWCO
CSI and NEWCO jointly and severally represent and warrant that
all of the following representations and warranties in this Section 6 are true
at the date of this Agreement and, subject to Section 7.8 hereof, shall be true
at the time of Closing and the Funding and Consummation Date, and that such
representations and warranties shall survive the Funding and Consummation Date
for a period of twelve months (the last day of such period being the "Expiration
Date"), except that (i) the warranties and representations set forth in Section
6.14 hereof shall survive until such time as the limitations period has run for
all tax periods ended on or prior to the Funding and Consummation Date, which
shall be deemed to be the Expiration Date for Section 6.14 and (ii) solely for
purposes of determining whether a claim for indemnification under Section
11.2(iv) hereof has been made on a timely basis, and solely to the extent that
in connection with the IPO, any of the STOCKHOLDERS actually incurs liability
under the 1933 Act, the 1934 Act, or any other Federal or state securities laws,
the representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for such purposes.
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6.1 DUE ORGANIZATION. CSI and NEWCO are each corporations duly
organized, validly existing and in good standing under the laws of the state of
Delaware, and each has the requisite power and authority to carry on its
business as it is now being conducted. CSI and NEWCO are each qualified to do
business and are each in good standing in each jurisdiction in which the nature
of its business makes such qualification necessary, except where the failure to
be so authorized or qualified would not have a Material Adverse Effect. True,
complete and correct copies of the Certificate of Incorporation and By-laws,
each as amended, of CSI and NEWCO (the "CSI Charter Documents") are all attached
hereto as Annex II.
6.2 AUTHORIZATION. (i) The respective representatives of CSI and NEWCO
executing this Agreement have the authority to enter into and bind CSI and NEWCO
to the terms of this Agreement and (ii) CSI and NEWCO have the full legal right,
power and authority to enter into this Agreement and the Merger.
6.3 CAPITAL STOCK OF CSI AND NEWCO. The authorized capital stock of CSI
and NEWCO is as set forth in Sections 1.4(ii) and (iii), respectively. All of
the issued and outstanding shares of the capital stock of NEWCO are owned by CSI
and all of the issued and outstanding shares of the capital stock of CSI are
owned by the persons set forth on Annex V hereof, in each case, free and clear
of all liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. All of the issued and outstanding shares
of the capital stock of CSI and NEWCO have been duly authorized and validly
issued, are fully paid and nonassessable, are owned of record and beneficially
by CSI and the persons set forth on Annex V, respectively, and further, such
shares were offered, issued, sold and delivered by CSI and NEWCO in compliance
with all applicable state and Federal laws concerning the issuance of
securities. Further, none of such shares were issued in violation of the
preemptive rights of any past or present stockholder of CSI or NEWCO.
6.4 TRANSACTIONS IN CAPITAL STOCK, ORGANIZATION ACCOUNTING. Except for
the Other Agreements and except as set forth on Schedule 6.4, (i) no option,
warrant, call, conversion right or
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commitment of any kind exists which obligates CSI or NEWCO to issue any of their
respective authorized but unissued capital stock; and (ii) neither CSI nor NEWCO
has any obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof. Schedule 6.4 also includes
complete and accurate copies of all stock option or stock purchase plans,
including a list, accurate as of the date hereof, of all outstanding options,
warrants or other rights to acquire shares of the stock of CSI.
6.5 SUBSIDIARIES. NEWCO has no subsidiaries. CSI has no subsidiaries
except for NEWCO and each of the companies identified as "NEWCO" in each of the
Other Agreements. Except as set forth in the preceding sentence, neither CSI nor
NEWCO presently owns, of record or beneficially, or controls, directly or
indirectly, any capital stock, securities convertible into capital stock or any
other equity interest in any corporation, association or business entity, and
neither CSI nor NEWCO, directly or indirectly, is a participant in any joint
venture, partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of
the following financial statements (the "CSI Financial Statements") of CSI,
which reflect the results of its operations from inception in December 1996:
CSI's audited Balance Sheet as of December 31, 1996 and Statements of Income,
Cash Flows and Retained Earnings for the period from December 12, 1996 through
December 31, 1996. Such CSI Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as noted thereon or on Schedule
6.6). Except as set forth on Schedule 6.6, such Balance Sheet as of December 31,
1996 presents fairly the financial position of CSI as of such date, and such
Statements of Income, Cash Flows and Retained Earnings present fairly the
results of operations for the period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7,
CSI and NEWCO have no material liabilities, contingent or otherwise, except as
set forth in or contemplated by this
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Agreement and the Other Agreements and except for fees incurred in connection
with the transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither CSI nor NEWCO is in violation of any law or regulation or
any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them which would have a Material Adverse Effect; and
except to the extent set forth in Schedule 6.8, there are no material claims,
actions, suits or proceedings, pending or, to the knowledge of CSI or NEWCO,
threatened against or affecting, CSI or NEWCO, at law or in equity, or before or
by any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over either of them
and no notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received. CSI and NEWCO have conducted and are conducting
their respective businesses in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable Federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations and are not in violation of any of the foregoing which
would have a Material Adverse Effect.
6.9 NO VIOLATIONS. Neither CSI nor NEWCO is in violation of any CSI
Charter Document. None of CSI, NEWCO, or, to the knowledge of CSI and NEWCO, any
other party thereto, is in default under any lease, instrument, agreement,
license, or permit to which CSI or NEWCO is a party, or by which CSI or NEWCO,
or any of their respective properties, are bound (collectively, the "CSI
Documents"); and (a) the rights and benefits of CSI and NEWCO under the CSI
Documents will not be adversely affected by the transactions contemplated hereby
and (b) the execution of this Agreement and the performance of the obligations
hereunder and the consummation of the transactions contemplated hereby will not
result in any material violation or breach or constitute a default under, any of
the terms or provisions of the CSI Documents or the CSI Charter Documents.
Except as set forth on Schedule 6.9, none of the CSI Documents requires notice
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to, or the consent or approval of, any governmental agency or other third party
with respect to any of the transactions contemplated hereby in order to remain
in full force and effect and consummation of the transactions contemplated
hereby will not give rise to any right to termination, cancellation or
acceleration or loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by CSI and NEWCO and the performance of the transactions contemplated
herein have been duly and validly authorized by the respective Boards of
Directors of CSI and NEWCO and this Agreement has been duly and validly
authorized by all necessary corporate action and is a legal, valid and binding
obligation of CSI and NEWCO.
6.11 CSI STOCK. At the time of issuance thereof, the CSI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of CSI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all substantive respects (which do not include the form of
certificate upon which it is printed or the presence or absence of a CUSIP
number on any such certificate) to the CSI Stock issued and outstanding as of
the date hereof by reason of the provisions of the Delaware GCL. The shares of
CSI Stock to be issued to the STOCKHOLDERS pursuant to this Agreement will not
be registered under the 1933 Act, except as provided in Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Neither CSI nor NEWCO has entered or will enter
into any agreement with any of the Founding Companies or any of the stockholders
of the Founding Companies or CSI other than the Other Agreements and the
agreements contemplated by each of the Other Agreements, including the
employment agreements and leases referred to therein.
6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. CSI was formed in
December 1996 and has conducted limited operations since that time. Neither CSI
nor NEWCO has conducted any material business since the date of its inception,
except in connection with this Agreement, the Other Agreements and the IPO.
Neither CSI nor NEWCO owns or has at any time owned any real property or any
material personal property or is a party to any other agreement, except as
listed on
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Schedule 6.13 and except that CSI is a party to the Other Agreements and the
agreements contemplated thereby and to such agreements as will be filed as
Exhibits to the Registration Statement.
6.14 TAXES. CSI has timely filed all requisite federal, state and other
tax returns or extension requests for all fiscal periods ended on or before the
Balance Sheet Date; and except as set forth on Schedule 6.14, there are no
examinations in progress or claims against CSI for federal, state and other
taxes (including penalties and interest) for any period or periods prior to and
including the Balance Sheet Date and no notice of any claim for taxes, whether
pending or threatened, has been received. All tax, including interest and
penalties (whether or not shown on any tax return) owed by CSI, any member of an
affiliated or consolidated group which includes or included CSI, or with respect
to any payment made or deemed made by CSI herein has been paid. The amounts
shown as accruals for taxes on CSI Financial Statements are sufficient for the
payment of all taxes of the kinds indicated (including penalties and interest)
for all fiscal periods ended on or before that date. Copies of any (i) tax
examinations, (ii) extensions of statutory limitations and (iii) federal and
local income tax returns and franchise tax returns of CSI for the year ended
December 31, 1996, are attached hereto as Schedule 6.14. CSI is not an
investment company as defined in Section 351(e)(1) of the Code.
6.15 ABSENCE OF CHANGES. Since December 31, 1996, except as set forth in
the drafts of the Registration Statement delivered to the Stockholders, and
except as contemplated by this Agreement and the Other Agreements, there has not
been:
(i) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of
CSI;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
CSI;
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(iii) any change in the authorized capital of CSI or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution
in respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of CSI;
(v) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of CSI;
(vi) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of CSI to any person;
(vii) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to CSI;
(viii) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
assets, property or rights of CSI or requiring consent of any party to
the transfer and assignment of any such assets, property or rights;
(ix) any waiver of any material rights or claims of CSI;
(x) any amendment or termination of any material contract,
agreement, license, permit or other right to which CSI is a party;
(xi) any transaction by CSI outside the ordinary course of its
business; (xii) any other distribution of property or assets by CSI
other than in the ordinary course of business.
6.16 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by CSI and NEWCO and the performance of the transactions contemplated
herein have been duly and validly authorized by the Boards of Directors of CSI
and NEWCO and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of CSI
and NEWCO.
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6.17 DISCLOSURE. The most recent draft of the Registration Statement
delivered to the COMPANY and the STOCKHOLDERS, together with this Agreement and
the information furnished to the COMPANY and the STOCKHOLDERS in connection
herewith, does not contain an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing does not apply to statements contained in or omitted from any
of such documents made or omitted in reliance upon information furnished by the
COMPANY or the STOCKHOLDERS.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Funding and Consummation Date, the COMPANY will afford to the
officers and authorized representatives of CSI and the Other Founding Companies
access to all of the COMPANY's sites, properties, books and records and will
furnish CSI with such additional financial and operating data and other
information as to the business and properties of the COMPANY as CSI or the Other
Founding Companies may from time to time reasonably request. The COMPANY will
cooperate with CSI and the Other Founding Companies, its representatives,
auditors and counsel in the preparation of any documents or other material which
may be required in connection with any documents or materials required by this
Agreement. CSI, NEWCO, the STOCKHOLDERS and the COMPANY will treat all
information obtained in connection with the negotiation and performance of this
Agreement or the due diligence investigations conducted with respect to the
Other Founding Companies as confidential in accordance with the provisions of
Section 14 hereof. In addition, CSI will cause each of the Other Founding
Companies to enter into a provision similar to this Section 7.1 requiring each
such Other Founding Company, its stockholders, directors, officers,
representatives, employees and agents to keep confidential any information
obtained by such Other Founding Company.
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(b) Between the date of this Agreement and the Funding and Consummation
Date, CSI will afford to the officers and authorized representatives of the
COMPANY access to all of CSI's and NEWCO's sites, properties, books and records
and will furnish the COMPANY with such additional financial and operating data
and other information as to the business and properties of CSI and NEWCO as the
COMPANY may from time to time reasonably request. CSI and NEWCO will cooperate
with the COMPANY, its representatives, auditors and counsel in the preparation
of any documents or other material which may be required in connection with any
documents or materials required by this Agreement. The COMPANY will cause all
information obtained in connection with the negotiation and performance of this
Agreement to be treated as confidential in accordance with the provisions of
Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Funding and Consummation Date, the COMPANY will, except as set
forth on Schedule 7.2:
(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective properties and facilities, including
those held under leases, in as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects all of its respective
obligations under agreements relating to or affecting its respective
assets, properties or rights;
(iv) use all reasonable efforts to keep in full force and effect
present insurance policies or other comparable insurance coverage;
(v) use its reasonable efforts to maintain and preserve its
business organization intact, retain its respective present key
employees and maintain its respective relationships with suppliers,
customers and others having business relations with the COMPANY;
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(vi) maintain compliance with all material permits, laws, rules
and regulations, consent orders, and all other orders of applicable
courts, regulatory agencies and similar governmental authorities;
(vii) maintain present debt and lease instruments and not enter
into new or amended debt or lease instruments except as permitted by
Section 10.6, without the knowledge and consent of CSI (which consent
shall not be unreasonably withheld), provided that debt and/or lease
instruments may be replaced without the consent of CSI if such
replacement instruments are on terms at least as favorable to the
COMPANY as the instruments being replaced; and
(viii) maintain or reduce present salaries and commission levels
for all officers, directors, employees and agents except for ordinary
and customary bonus and salary increases for employees in accordance
with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between
the date hereof and the Funding and Consummation Date, the COMPANY will not,
without prior written consent of CSI:
(i) make any change in its Articles of Incorporation or By-laws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than
in connection with the exercise of options or warrants listed in
Schedule 5.4;
(iii) except as permitted by Section 10.6 declare or pay any
dividend, or make any distribution in respect of its stock whether now
or hereafter outstanding, or purchase, redeem or otherwise acquire or
retire for value any shares of its stock (provided that the COMPANY may
declare and pay dividends pursuant to Section 10.6 hereof);
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except if it is in
the normal course of business (consistent with past practice) or
involves an amount not in excess of $100,000;
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(v) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired, except (1) with respect to purchase money
liens incurred in connection with the acquisition of equipment with an
aggregate cost not in excess of $50,000 necessary or desirable for the
conduct of the businesses of the COMPANY, (2) (A) liens for taxes either
not yet due or being contested in good faith and by appropriate
proceedings (and for which contested taxes adequate reserves have been
established and are being maintained) or (B) materialmen's, mechanics',
workers', repairmen's, employees' or other like liens arising in the
ordinary course of business (the liens set forth in clause (2) being
referred to herein as "Statutory Liens"), or (3) liens set forth on
Schedule 5.10 and/or 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the
start-up of any new business;
(viii) merge or consolidate or agree to merge or consolidate with
or into any other corporation;
(ix) waive any material rights or claims of the COMPANY, provided
that the COMPANY may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be
included in Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of the COMPANY; or
(xi) enter into any other transaction outside the ordinary course
of its business or prohibited hereunder. 7.4 NO SHOP. None of the
STOCKHOLDERS, the COMPANY, nor any agent, officer, director, trustee or
any representative of any of the foregoing will, during the period
commencing
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on the date of this Agreement and ending with the earlier to occur of the
Funding and Consummation Date or the termination of this Agreement in accordance
with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than CSI or its
authorized agents relating to, any acquisition or purchase of all or a
material amount of the assets of, or any equity interest in, the COMPANY
or a merger, consolidation or business combination of the COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the COMPANY
shallsatisfy any requirement for notice of the transactions contemplated by this
Agreement under applicable collective bargaining agreements, and shall provide
CSI on Schedule 7.5 with proof that any required notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate (i) any
stockholders agreements, voting agreements, voting trusts, options, warrants and
employment agreements between the COMPANY and any employee listed on Schedule
9.12 hereto and (ii) any existing agreement between the COMPANY and any
STOCKHOLDER, on or prior to the Funding and Consummation Date. Such termination
agreements are listed on Schedule 7.6 and copies thereof shall be attached
thereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY
shall give prompt notice to CSI of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect at or prior to the Closing
and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by such person hereunder. CSI and NEWCO shall give prompt notice to the COMPANY
of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be
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likely to cause any representation or warranty of CSI or NEWCO contained herein
to be untrue or inaccurate in any material respect at or prior to the Closing
and (ii) any material failure of CSI or NEWCO to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder. The delivery of any notice pursuant to this Section 7.7 shall not be
deemed to (i) modify the representations or warranties hereunder of the party
delivering such notice, which modification may only be made pursuant to Section
7.8, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until 24 hours prior to the
anticipated effectiveness of the Registration Statement to supplement or amend
promptly the Schedules hereto with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14 and 5.15 shall
only have to be delivered at the Closing Date, unless such Schedule is to be
amended to reflect an event occurring other than in the ordinary course of
business. Notwithstanding the foregoing sentence, no amendment or supplement to
a Schedule prepared by the COMPANY that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless CSI and
a majority of the Founding Companies other than the COMPANY consent to such
amendment or supplement; and provided further, that no amendment or supplement
to a Schedule prepared by CSI or NEWCO that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless a
majority of the Founding Companies consent to such amendment or supplement. For
all purposes of this Agreement, including without limitation for purposes of
determining whether the conditions set forth in Sections 8.1 and 9.1 have been
fulfilled, the Schedules hereto shall be deemed to be the Schedules as amended
or supplemented pursuant to this Section 7.8. In the event that one of the Other
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Founding Companies seeks to amend or supplement a Schedule pursuant to Section
7.8 of one of the Other Agreements, and such amendment or supplement constitutes
or reflects an event or occurrence that would have a Material Adverse Effect on
such Other Founding Company, CSI shall give the COMPANY notice promptly after it
has knowledge thereof. If CSI and a majority of the Founding Companies consent
to such amendment or supplement, which consent shall have been deemed given by
CSI or any Founding Company if no response is received within 24 hours following
receipt of notice of such amendment or supplement (or sooner if required by the
circumstances under which such consent is requested), but the COMPANY does not
give its consent, the COMPANY may terminate this Agreement pursuant to Section
12.1(iv) hereof. In the event that the COMPANY seeks to amend or supplement a
Schedule pursuant to this Section 7.8, and CSI and a majority of the Other
Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. In the event that CSI or NEWCO seeks to amend or supplement a
Schedule pursuant to this Section 7.8 and a majority of the Founding Companies
do not consent to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to
this Agreement shall be liable to any other party if this Agreement shall be
terminated pursuant to the provisions of this Section 7.8. No amendment of or
supplement to a Schedule shall be made later than 24 hours prior to the
anticipated effectiveness of the Registration Statement.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY
and STOCKHOLDERS shall furnish or cause to be furnished to CSI and the
Underwriters all of the information concerning the COMPANY and the STOCKHOLDERS
required for inclusion in, and will cooperate with CSI and the Underwriters in
the preparation of, the Registration Statement and the prospectus included
therein (including audited and unaudited financial statements, prepared in
accordance with generally accepted accounting principles, in form suitable for
inclusion in the Registration Statement). The COMPANY and the STOCKHOLDERS agree
promptly to advise CSI if at any time during the period in which a prospectus
relating to the offering is required to be
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delivered under the Securities Act, any information contained in the prospectus
concerning the COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in
any material respect, and to provide the information needed to correct such
inaccuracy. Insofar as the information relates solely to the COMPANY or the
STOCKHOLDERS, the COMPANY represents and warrants as to such information with
respect to itself, and each Stockholder represents and warrants, as to such
information with respect to the COMPANY and himself or herself, that the
Registration Statement will not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the
Funding and Consummation Date, and CSI shall have had sufficient time to review
the unaudited consolidated balance sheets of the COMPANY as of the end of all
fiscal quarters following the Balance Sheet Date, and the unaudited consolidated
statement of income, cash flows and retained earnings of the COMPANY for all
fiscal quarters ended after the Balance Sheet Date, disclosing no material
adverse change in the financial condition of the COMPANY or the results of its
operations from the financial statements as of the Balance Sheet Date. Such
financial statements shall have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated (except as noted therein). Except as noted in such financial
statements, all of such financial statements will present fairly the results of
operations of the COMPANY for the periods indicated therein.
7.11 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or convenient
to carry out the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. CSI shall maintain its authorized capital stock
as set forth in the Registration Statement filed with the SEC except for such
changes in authorized capital stock
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as are made to respond to comments made by the SEC or requirements of any
exchange or automated trading system for which application is made to register
the CSI Stock.
7.13 COMPLIANCE WITH THE ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ANTITRUST IMPROVEMENTS ACT OF
1976 (THE "▇▇▇▇-▇▇▇▇▇ ACT"). All parties to this Agreement hereby recognize that
one or more filings under the ▇▇▇▇-▇▇▇▇▇ Act may be required in connection with
the transactions contemplated herein. If it is determined by the parties to this
Agreement that filings under the ▇▇▇▇-▇▇▇▇▇ Act are required, then: (i) each of
the parties hereto agrees to cooperate and use its best efforts to comply with
the ▇▇▇▇-▇▇▇▇▇ Act, (ii) such compliance by the STOCKHOLDERS and the COMPANY
shall be deemed a condition precedent in addition to the conditions precedent
set forth in Section 9 of this Agreement, and such compliance by CSI and NEWCO
shall be deemed a condition precedent in addition to the conditions precedent
set forth in Section 8 of this Agreement, and (iii) the parties agree to
cooperate and use their best efforts to cause all filings required under the
▇▇▇▇-▇▇▇▇▇ Act to be made. If filings under the ▇▇▇▇-▇▇▇▇▇ Act are required, the
costs and expenses thereof (including filing fees) shall be borne by CSI.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of STOCKHOLDERS and the COMPANY with respect to actions
to be taken on the Closing Date are subject to the satisfaction or waiver on or
prior to the Closing Date of all of the following conditions. The obligations of
the STOCKHOLDERS and the COMPANY with respect to actions to be taken on the
Funding and Consummation Date are subject to the satisfaction or waiver on or
prior to the Funding and Consummation Date of the conditions set forth in
Sections 8.1, 8.5, 8.8, 8.9 and 8.12. As of the Closing Date or, with respect to
the conditions set forth in Sections 8.1, 8.5, 8.8, 8.9 and 8.12, as of the
Funding and Consummation Date, if any of such conditions has not been satisfied,
the Stockholders (acting in unison) shall have the right to terminate this
Agreement or, in the alternative, waive any condition not so satisfied. Any act
or
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action of the Stockholders in consummating the Closing or delivering
certificates representing COMPANY Stock as of the Funding and Consummation Date
shall constitute a waiver of any conditions not so satisfied. However, no such
waiver shall be deemed to affect the survival of the representations and
warranties of CSI and NEWCO contained in Section 6 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of CSI and NEWCO contained in Section 6 shall be
true and correct in all material respects as of the Closing Date and the Funding
and Consummation Date as though such representations and warranties had been
made as of that time; all of the terms, covenants and conditions of this
Agreement to be complied with and performed by CSI and NEWCO on or before the
Closing Date and the Funding and Consummation Date shall have been duly complied
with and performed in all material respects; and certificates to the foregoing
effect dated the Closing Date and the Funding and Consummation Date,
respectively, and signed by the President or any Vice President of CSI shall
have been delivered to the STOCKHOLDERS.
8.2 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to the COMPANY and its counsel.
The STOCKHOLDERS and the COMPANY shall be satisfied that the Registration
Statement and the prospectus forming a part thereof, including any amendments
thereof or supplements thereto, shall not contain any untrue statement of a
material fact, or omit to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, provided
that the condition contained in this sentence shall be deemed satisfied if the
COMPANY or STOCKHOLDERS shall have failed to inform CSI in writing prior to the
effectiveness of the Registration Statement of the existence of an untrue
statement of a material fact or the omission of such a statement of a material
fact.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of the
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COMPANY as a result of which the management of the COMPANY deems it inadvisable
to proceed with the transactions hereunder.
8.4 OPINION OF COUNSEL. The COMPANY shall have received an opinion from
counsel for CSI, dated the Funding and Consummation Date, in the form annexed
hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the underwriters named therein shall have
agreed to acquire on a firm commitment basis, subject to the conditions set
forth in the underwriting agreement, on terms such that the aggregate value of
the cash and the number of shares of CSI Stock to be received by the
STOCKHOLDERS is not less than the Minimum Value set forth on Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transaction contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
the Merger and no governmental agency or body shall have taken any other action
or made any request of COMPANY as a result of which COMPANY deems it inadvisable
to proceed with the transactions hereunder.
8.7 GOOD STANDING CERTIFICATES. CSI and NEWCO each shall have delivered
to the COMPANY a certificate, dated as of a date no later than ten days prior to
the Closing Date, duly issued by the Delaware Secretary of State and in each
state in which CSI or NEWCO is authorized to do business, showing that each of
CSI and NEWCO is in good standing and authorized to do business and that all
state franchise and/or income tax returns and taxes for CSI and NEWCO,
respectively, for all periods prior to the Closing have been filed and paid.
8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to CSI or NEWCO which would constitute a Material Adverse
Effect.
8.9 CLOSING OF IPO. The closing of the sale of the CSI Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
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8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of CSI and of NEWCO, certifying the truth and correctness of attached copies of
the CSI's and NEWCO's respective Certificates of Incorporation (including
amendments thereto), By-Laws (including amendments thereto), and resolutions of
the boards of directors and, if required, the stockholders of CSI and NEWCO
approving CSI's and NEWCO's entering into this Agreement and the consummation of
the transactions contemplated hereby.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.12
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 TAX MATTERS. The STOCKHOLDERS shall have received an opinion of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ L.L.P. or another tax advisor reasonably acceptable to the
STOCKHOLDERS that the CSI Plan of Organization should qualify as a tax-free
transfer of property under Section 351 of the Code, and that the STOCKHOLDERS
will not recognize gain to the extent the STOCKHOLDERS exchange stock of the
COMPANY for CSI Stock (but not cash or other property) pursuant to the CSI Plan
of Organization.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF CSI AND NEWCO
The obligations of CSI and NEWCO with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. The obligations of CSI and
NEWCO with respect to actions to be taken on the Funding and Consummation Date
are subject to the satisfaction or waiver on or prior to the Funding and
Consummation Date of the conditions set forth in Sections 9.1, 9.4 and 9.13. As
of the Closing Date or, with respect to the conditions set forth in Sections
9.1, 9.4 and 9.13, as of the Funding and Consummation Date, all conditions not
satisfied shall be deemed to have been waived, except that
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no such waiver shall be deemed to affect the survival of the representations and
warranties of the COMPANY contained in Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All the
representations and warranties of the STOCKHOLDERS and the COMPANY contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date and the Funding and Consummation Date with the same effect as
though such representations and warranties had been made on and as of such date;
all of the terms, covenants and conditions of this Agreement to be complied with
or performed by the STOCKHOLDERS and the COMPANY on or before the Closing Date
or the Funding and Consummation Date, as the case may be, shall have been duly
performed or complied with in all material respects; and the STOCKHOLDERS shall
have delivered to CSI certificates dated the Closing Date and the Funding and
Consummation Date, respectively, and signed by them to such effect.
9.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of CSI as a result of which the
management of CSI deems it inadvisable to proceed with the transactions
hereunder.
9.3 SECRETARY'S CERTIFICATE. CSI shall have received a certificate,
dated the Closing Date and signed by the secretary of the COMPANY, certifying
the truth and correctness of attached copies of the COMPANY's Certificate of
Incorporation (including amendments thereto), By-Laws (including amendments
thereto), and resolutions of the board of directors and the STOCKHOLDERS
approving the COMPANY's entering into this Agreement and the consummation of the
transactions contemplated hereby.
9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect, and the COMPANY shall not have suffered any material loss or damages to
any of its properties or assets, whether or not
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covered by insurance, which change, loss or damage materially affects or impairs
the ability of the COMPANY to conduct its business.
9.5 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to CSI
an instrument dated the Closing Date releasing the COMPANY from (i) any and all
claims of the STOCKHOLDERS against the COMPANY and CSI and (ii) obligations of
the COMPANY and CSI to the STOCKHOLDERS, except for (x) items specifically
identified on Schedules 5.10 and 5.15 as being claims of or obligations to the
STOCKHOLDERS, (y) continuing obligations to STOCKHOLDERS relating to their
employment by the COMPANY and (z) obligations arising under this Agreement or
the transactions contemplated hereby.
9.6 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been approved
by counsel to CSI.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS
shall have been canceled effective prior to or as of the Funding and
Consummation Date.
9.8 OPINION OF COUNSEL. CSI shall have received an opinion from Counsel
to the COMPANY and the STOCKHOLDERS, dated the Closing Date, substantially in
the form annexed hereto as Annex VII.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all consents
and approvals of third parties listed on Schedule 5.23 shall have been obtained;
and no action or proceeding shall have been instituted or threatened to restrain
or prohibit the Merger and no governmental agency or body shall have taken any
other action or made any request of CSI as a result of which CSI deems it
inadvisable to proceed with the transactions hereunder.
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9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to CSI
a certificate, dated as of a date no earlier than ten days prior to the Closing
Date, duly issued by the appropriate governmental authority in the COMPANY's
state of incorporation and, unless waived by CSI, in each state in which the
COMPANY is authorized to do business, showing the COMPANY is in good standing
and authorized to do business and that all state franchise and/or income tax
returns and taxes for the COMPANY for all periods prior to the Closing have been
filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.12
shall enter into an employment agreement substantially in the form of Annex VIII
hereto.
9.13 CLOSING OF IPO. The closing of the sale of the CSI Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to CSI a
certificate to the effect that he is not a foreign person pursuant to Section
1.1445-2(b) of the Treasury regulations.
10. COVENANTS OF CSI AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. CSI
shall use its best efforts to have the STOCKHOLDERS released from any and all
guarantees on any indebtedness that they personally guaranteed and from any and
all pledges of assets that they pledged to secure such indebtedness for the
benefit of the COMPANY, with all such guarantees on indebtedness being assumed
by CSI. In the event that CSI cannot obtain such releases from the lenders of
any such guaranteed indebtedness on or prior to 120 days subsequent to the
Funding and Consummation Date, CSI shall pay off or otherwise refinance or
retire such indebtedness. From and after the Funding and Consummation Date and
until such time as all of such indebtedness is paid off, refinanced or retired,
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CSI shall maintain unencumbered funds in amounts sufficient to provide for such
pay off, refinancing or retirement, provided that CSI may use such funds for
other purposes, in its sole discretion, with the prior written consent of each
STOCKHOLDER who has not as of that time been released from his or her guarantee
as described above and whose indebtedness as described above has not as of that
time been paid off, refinanced or retired.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as
contemplated by this Agreement or the Registration Statement, after the Funding
and Consummation Date, CSI shall not and shall not permit any of its
subsidiaries to undertake any act that would jeopardize the tax-free status of
the organization, including without limitation:
(a) the retirement or reacquisition, directly or indirectly, of
all or part of the CSI Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit
of the STOCKHOLDERS.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANY shall, if possible, file or cause to be filed all
separate Returns of any Acquired Party for all taxable periods that end
on or before the Funding and Consummation Date. Notwithstanding the
foregoing, the STOCKHOLDERS shall file or cause to be filed all separate
federal income Tax Returns of any Acquired Party for all taxable periods
that end on or before the Funding and Consummation Date. Each
STOCKHOLDER shall pay or cause to be paid all Tax liabilities (in excess
of all amounts already paid with respect thereto or properly accrued or
reserved with respect thereto on the COMPANY Financial Statements) shown
by such Returns to be due.
(ii) CSI shall file or cause to be filed all separate Returns of,
or that include, any Acquired Party for all taxable periods ending after
the Funding and Consummation Date.
(iii) Each party hereto shall, and shall cause its subsidiaries
and affiliates to, provide to each of the other parties hereto such
cooperation and information as any of them
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reasonably may request in filing any Return, amended Return or claim for
refund, determining a liability for Taxes or a right to refund of Taxes
or in conducting any audit or other proceeding in respect of Taxes. Such
cooperation and information shall include providing copies of all
relevant portions of relevant Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents
relating to rulings or other determinations by Taxing Authorities and
relevant records concerning the ownership and Tax basis of property,
which such party may possess. Each party shall make its employees
reasonably available on a mutually convenient basis at its cost to
provide explanation of any documents or information so provided. Subject
to the preceding sentence, each party required to file Returns pursuant
to this Agreement shall bear all costs of filing such Returns.
(iv) Each of the COMPANY, NEWCO, CSI and each STOCKHOLDER shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and treat the
transaction as a tax-free contribution under Section 351(a) of the Code
subject to gain, if any, recognized on the receipt of cash or other
property under Section 351(b) of the Code. 10.4 DIRECTORS. The persons
named in the draft of the Registration Statement shall be
appointed as directors and elected as officers of CSI, as and to the extent set
forth in the draft of the Registration Statement, promptly following the Funding
and Consummation Date. This provision shall not imply that the STOCKHOLDERS have
any power or duty to elect officers of CSI.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Funding and
Consummation Date, CSI shall not terminate any health insurance, life insurance
or 401(k) plan in effect at the COMPANY until such time as CSI is able to
replace such plan with a plan that is applicable to CSI and all of its then
existing subsidiaries, provided that CSI shall have no obligation to provide
replacement plans that have the same terms and provisions as the existing plans,
provided, further, that any new health insurance plan shall provide for coverage
for preexisting conditions. On
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the Funding and Consummation Date, the employees of the COMPANY will be the
employees of the Surviving Corporation (provided that this provision is for
purposes of clarifying that the Merger, in and of itself, will not have any
impact on the employment status of any employee and provided, further that this
provision shall not in any way limit the management rights of the Surviving
Corporation or CSI to assess workforce needs and make appropriate adjustments as
necessary or desirable within their discretion subject to applicable laws and
collective bargaining agreements).
10.6 DIVIDENDS. If the COMPANY is an S corporation, the COMPANY may pay
to each STOCKHOLDER as a dividend the full amount of his or her "accumulated
adjustments account" (as defined in Section 1368(e) of the Code) as of the
Balance Sheet Date, and may also pay to the STOCKHOLDERS as a dividend the full
amount of the COMPANY's earnings taxable to such STOCKHOLDERS for the period
after the Balance Sheet Date to the Funding and Consummation Date. If the
COMPANY is a C corporation, the COMPANY may pay to the STOCKHOLDERS as a
dividend the full amount of the COMPANY's earnings for the period after the
Balance Sheet Date to the Funding and Consummation Date. The COMPANY may borrow
funds to the extent necessary to make the payments contemplated by this Section
10.6 and to the extent necessary to ensure that the COMPANY has cash on hand to
adequately fund operations on the Funding and Consummation Date.
11. INDEMNIFICATION
The STOCKHOLDERS, CSI and NEWCO each make the following covenants that
are applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS
covenant and agree that they, jointly and severally, will indemnify, defend,
protect and hold harmless CSI, NEWCO, the COMPANY and the Surviving Corporation
at all times, from and after the date of this Agreement until the Expiration
Date, from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but
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without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by CSI, NEWCO, the COMPANY or the Surviving Corporation as a result of
or arising from (i) any breach of the representations and warranties of the
STOCKHOLDERS or the COMPANY set forth herein or on the schedules or certificates
delivered in connection herewith, (ii) any breach of any agreement on the part
of the STOCKHOLDERS or the COMPANY under this Agreement, or (iii) any liability
under the 1933 Act, the 1934 Act or other Federal or state law or regulation, at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact relating to the COMPANY or the
STOCKHOLDERS, and provided to CSI or its counsel by the COMPANY or the
STOCKHOLDERS (but in the case of the STOCKHOLDERS, only if such statement was
provided in writing) contained in the Registration Statement or any prospectus
forming a part thereof, or any amendment thereof or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact relating to the COMPANY or the STOCKHOLDERS required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that such indemnity shall not inure to the benefit of CSI, NEWCO, the
COMPANY or the Surviving Corporation to the extent that such untrue statement
(or alleged untrue statement) was made in, or omission (or alleged omission)
occurred in, any preliminary prospectus and the STOCKHOLDERS provided, in
writing, corrected information to CSI counsel and to CSI for inclusion in the
final prospectus, and such information was not so included or properly
delivered, and provided further, that no STOCKHOLDER shall be liable for any
indemnification obligation pursuant to this Section 11.1 to the extent
attributable to a breach of any representation, warranty or agreement made
herein individually by any other STOCKHOLDER.
11.2 INDEMNIFICATION BY CSI. CSI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
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STOCKHOLDERS as a result of or arising from (i) any breach by CSI or NEWCO of
their representations and warranties set forth herein or on the schedules or
certificates attached hereto, (ii) any nonfulfillment of any agreement on the
part of CSI or NEWCO under this Agreement, or (iii) any liabilities which the
STOCKHOLDERS may incur due to CSI's or NEWCO's failure to be responsible for the
liabilities and obligations of the COMPANY as provided in Section 1 hereof
(except to the extent that CSI or NEWCO has claims against the STOCKHOLDERS by
reason of such liabilities); or (iv) any liability under the 1933 Act, the 1934
Act or other Federal or state law or regulation, at common law or otherwise,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact relating to CSI, NEWCO or any of the Other Founding Companies
contained in any preliminary prospectus, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to CSI or NEWCO or any of the Other
Founding Companies required to be stated therein or necessary to make the
statements therein not misleading.
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently,
provided that the Indemnifying Party shall not settle any criminal proceeding
without the written consent of the Indemnified Party. If the Indemnifying Party
undertakes to defend or settle, it shall promptly notify the Indemnified
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Party of its intention to do so, and the Indemnified Party shall cooperate with
the Indemnifying Party and its counsel in the defense thereof and in any
settlement thereof. Such cooperation shall include, but shall not be limited to,
furnishing the Indemnifying Party with any books, records or information
reasonably requested by the Indemnifying Party that are in the Indemnified
Party's possession or control. All Indemnified Parties shall use the same
counsel, which shall be the counsel selected by Indemnifying Party, provided
that if counsel to the Indemnifying Party shall have a conflict of interest that
prevents counsel for the Indemnifying Party from representing Indemnified Party,
Indemnified Party shall have the right to participate in such matter through
counsel of its own choosing and Indemnifying Party will reimburse the
Indemnified Party for the reasonable expenses of its counsel. After the
Indemnifying Party has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except (i) as set forth in the preceding sentence and (ii) to the
extent such participation is requested by the Indemnifying Party, in which event
the Indemnified Party shall be reimbursed by the Indemnifying Party for
reasonable additional legal expenses and out-of-pocket expenses. If the
Indemnifying Party desires to accept a final and complete settlement of any such
Third Person claim and the Indemnified Party refuses to consent to such
settlement, then the Indemnifying Party's liability under this Section with
respect to such Third Person claim shall be limited to the amount so offered in
settlement by said Third Person. Upon agreement as to such settlement between
said Third Person and the Indemnifying Party, the Indemnifying Party shall, in
exchange for a complete release from the Indemnified Party, promptly pay to the
Indemnified Party the amount agreed to in such settlement and the Indemnified
Party shall, from that moment on, bear full responsibility for any additional
costs of defense which it subsequently incurs with respect to such claim and all
additional costs of settlement or judgment. If the Indemnifying Party does not
undertake to defend such matter to which the Indemnified Party is entitled to
indemnification
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hereunder, or fails diligently to pursue such defense, the Indemnified Party may
undertake such defense through counsel of its choice, at the cost and expense of
the Indemnifying Party, and the Indemnified Party may settle such matter, and
the Indemnifying Party shall reimburse the Indemnified Party for the amount paid
in such settlement and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith, provided, however, that under no
circumstances shall the Indemnified Party settle any Third Person claim without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section
11 shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party, provided that, nothing herein shall be
construed to limit the right of a party, in a proper case, to seek injunctive
relief for a breach of this Agreement.
11.5 LIMITATIONS ON INDEMNIFICATION. CSI, NEWCO, the Surviving
Corporation and the other persons or entities indemnified pursuant to Section
11.1 or 11.2 shall not assert any claim for indemnification hereunder against
the STOCKHOLDERS until such time as, and solely to the extent that, the
aggregate of all claims which such persons may have against such the
STOCKHOLDERS shall exceed the greater of (a) 1.0% of the sum of the cash paid to
STOCKHOLDERS plus the value of the CSI Stock delivered to STOCKHOLDERS
(calculated as provided in this Section 11.5) or (b) $50,000 (the
"Indemnification Threshold"). STOCKHOLDERS shall not assert any claim for
indemnification hereunder against CSI or NEWCO until such time as, and solely to
the extent that, the aggregate of all claims which STOCKHOLDERS may have against
CSI or NEWCO shall exceed $50,000.
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No person shall be entitled to indemnification under this Section 11 if
and to the extent that such person's claim for indemnification is directly or
indirectly related to a breach by such person of any representation, warranty,
covenant or other agreement set forth in this Agreement.
Notwithstanding any other term of this Agreement, no STOCKHOLDER shall
be liable under this Section 11 for an amount which exceeds the amount of
proceeds received by such STOCKHOLDER in connection with the Merger. For
purposes of calculating the value of the CSI Stock received by a STOCKHOLDER,
CSI Stock shall be valued at its initial public offering price as set forth in
the Registration Statement. It is hereby understood and agreed that a
STOCKHOLDER may satisfy an indemnification obligation through payment of a
combination of stock and cash in proportion equal to the proportion of stock and
cash received by such STOCKHOLDER in connection with the Merger, valued as
described immediately above.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Funding and Consummation Date solely:
(i) by mutual consent of the boards of directors of CSI and the COMPANY;
(ii) by the STOCKHOLDERS or the COMPANY (acting through its board of
directors),on the one hand, or by CSI (acting through its board of directors),
on the other hand, if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by September 30, 1997,
unless the failure of such transactions to be consummated is due to the willful
failure of the party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by it
prior to or on the Funding and Consummation Date;
(iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by CSI, on the
other hand, if a material breach or default shall be made by the other party in
the observance or in the due and timely performance of any of the covenants or
agreements contained herein, and the curing of such default shall not have been
made on or before the Funding and Consummation Date or by the
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STOCKHOLDERS, or the COMPANY, if the conditions set forth in Section 8 hereof
have not been satisfied or waived as of the Closing Date or the Funding and
Consummation Date, as applicable, or by CSI, if the conditions set forth in
Section 9 hereof have not been satisfied or waived as of the Closing Date or the
Funding and Consummation Date, as applicable;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section
7.8 hereof, the termination of this Agreement will in no way limit any
obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement including, but not limited
to, legal and audit costs and out of pocket expenses.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. The STOCKHOLDERS will not, for a period of
five (5) years following the Funding and Consummation Date, for any reason
whatsoever, directly or indirectly, for themselves or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any heating,
ventilating or air conditioning services business in direct competition with CSI
or any of the subsidiaries thereof, within 100 miles of where the COMPANY or any
of its subsidiaries conducted business prior to the effectiveness of the Merger
(the "Territory");
(ii) call upon any person who is, at that time, within the Territory, an
employee of CSI (including the subsidiaries thereof) in a sales representative
or managerial capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of CSI (including the
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subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to call
upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is, at that time, or which
has been, within one (1) year prior to the Funding and Consummation Date, a
customer of CSI (including the subsidiaries thereof), of the COMPANY or of any
of the Other Founding Companies within the Territory for the purpose of
soliciting or selling products or services in direct competition with CSI within
the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's own behalf or on behalf of any competitor in the heating,
ventilation or air conditioning services business, which candidate, to the
actual knowledge of such STOCKHOLDER after due inquiry, was called upon by CSI
(including the subsidiaries thereof) or for which, to the actual knowledge of
such STOCKHOLDER after due inquiry, CSI (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of the COMPANY
to any person, firm, partnership, corporation or business for any reason or
purpose whatsoever except to the extent that the COMPANY has in the past
disclosed such information to the public for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any STOCKHOLDER from acquiring as an investment not more than one
percent (1%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to
CSI as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to CSI for which it would
have no other adequate remedy, each STOCKHOLDER agrees that the foregoing
covenant may be enforced by CSI in the event of breach by such STOCKHOLDER, by
injunctions and restraining orders.
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13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of CSI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of CSI.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. All of the covenants in this Section 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any STOCKHOLDER
against CSI (including the subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by CSI
of such covenants. It is specifically agreed that the period of five (5) years
stated at the beginning of this Section 13, during which the agreements and
covenants of each STOCKHOLDER made in this Section 13 shall be effective, shall
be computed by excluding from such computation any time during which such
STOCKHOLDER is in violation of any provision of this Section 13. The covenants
contained in Section 13 shall not be affected by any breach of any other
provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that
this covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
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14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY, the Other Founding Companies,
and/or CSI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's, the Other Founding
Companies' and/or CSI's respective businesses. The STOCKHOLDERS agree that they
will not disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of CSI, (b) following the Closing, such
information may be disclosed by the STOCKHOLDERS as is required in the course of
performing their duties for CSI or the Surviving Corporation and (c) to counsel
and other advisers, provided that such advisers (other than counsel) agree to
the confidentiality provisions of this Section 14.1, unless (i) such information
becomes known to the public generally through no fault of the STOCKHOLDERS, (ii)
disclosure is required by law or the order of any governmental authority under
color of law, provided, that prior to disclosing any information pursuant to
this clause (ii), the STOCKHOLDERS shall, if possible, give prior written notice
thereof to CSI and provide CSI with the opportunity to contest such disclosure,
or (iii) the disclosing party reasonably believes that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party. In the event of a breach or threatened breach by any of the STOCKHOLDERS
of the provisions of this Section, CSI shall be entitled to an injunction
restraining such STOCKHOLDERS from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting CSI
from pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. In the event the transactions contemplated by
this Agreement are not consummated, STOCKHOLDERS shall have none of the
above-mentioned restrictions on their ability to disseminate confidential
information with respect to the COMPANY.
14.2 CSI AND NEWCO. CSI and NEWCO recognize and acknowledge that they
had in the past and currently have access to certain confidential information of
the COMPANY, such as
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operational policies, and pricing and cost policies that are valuable, special
and unique assets of the COMPANY's business. CSI and NEWCO agree that, prior to
the Closing, or if the Transactions contemplated by this Agreement are not
consummated, they will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of the COMPANY, (b) to
counsel and other advisers, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section 14.1, (c) to the Other
Founding Companies and their representatives pursuant to Section 7.1(a), unless
(i) such information becomes known to the public generally through no fault of
CSI or NEWCO, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), CSI and NEWCO shall, if possible,
give prior written notice thereof to the COMPANY and the STOCKHOLDERS and
provide the COMPANY and the STOCKHOLDERS with the opportunity to contest such
disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party, and (d) to the public to the extent necessary or advisable in
connection with the filing of the Registration Statement and the IPO and the
securities laws applicable thereto and to the operation of CSI as a publicly
held entity after the IPO. In the event of a breach or threatened breach by CSI
or NEWCO of the provisions of this Section, the COMPANY and the STOCKHOLDERS
shall be entitled to an injunction restraining CSI and NEWCO from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing any
other available remedy for such breach or threatened breach, including the
recovery of damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the
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parties hereto agree that, in the event of a breach by any of them of the
foregoing covenants, the covenant may be enforced against the other parties by
injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14
shall survive the termination of this Agreement for a period of five years from
the Funding and Consummation Date.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for a period of one year from the Closing, except pursuant
to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign, exchange,
transfer, encumber, pledge, distribute, appoint, or otherwise dispose of any
shares of CSI Stock as described in Section 3.1 received by the STOCKHOLDERS in
the Merger. The certificates evidencing the CSI Stock delivered to the
STOCKHOLDERS pursuant to Section 3 of this Agreement will bear a legend
substantially in the form set forth below and containing such other information
as CSI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED
OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT
OR OTHER DISPOSITION PRIOR TO THE FIRST ANNIVERSARY OF CLOSING DATE. UPON THE
WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE
THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT)
AFTER THE DATE SPECIFIED ABOVE.
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16. FEDERAL SECURITIES ACT REPRESENTATIONS
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS acknowledge that the shares
of CSI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement have
not been and will not be registered under the Act (except as provided in Section
17 hereof) and may not be resold without compliance with the Act. The CSI Stock
to be acquired by such STOCKHOLDERS pursuant to this Agreement is being acquired
solely for their own respective accounts, for investment purposes only, and with
no present intention of distributing, selling or otherwise disposing of it in
connection with a distribution. The STOCKHOLDERS covenant, warrant and represent
that none of the shares of CSI Stock issued to such STOCKHOLDERS will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Act and the rules and regulations of the SEC. All the CSI Stock shall
bear the following legend in addition to the legend required under Section 15 of
this Agreement: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND APPLICABLE SECURITIES LAW.
16.2 ECONOMIC RISK; SOPHISTICATION. The STOCKHOLDERS are able to bear
the economic risk of an investment in the CSI Stock to be acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and
have such knowledge and experience in financial and business matters that they
are capable of evaluating the merits and risks of the proposed investment in the
CSI Stock. The STOCKHOLDERS party hereto have had an adequate opportunity to ask
questions and receive answers from the officers of CSI concerning any and all
matters relating to the transactions described herein including, without
limitation, the background and experience of the current and proposed officers
and directors of CSI, the plans for the operations of the business
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of CSI, the business, operations and financial condition of the Founding
Companies other than the COMPANY, and any plans for additional acquisitions and
the like. The STOCKHOLDERS have asked any and all questions in the nature
described in the preceding sentence and all questions have been answered to
their satisfaction.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing,
whenever CSI proposes to register any CSI Stock for its own or others account
under the 1933 Act for a public offering, other than (i) any shelf registration
of shares to be used as consideration for acquisitions of additional businesses
by CSI and (ii) registrations relating to employee benefit plans, CSI shall give
each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon the
written request of any of the STOCKHOLDERS given within 30 days after receipt of
such notice, CSI shall cause to be included in such registration all of the CSI
Stock issued to the STOCKHOLDERS pursuant to this Agreement (including any stock
issued as (or issuable upon the conversion or exchange of any convertible
security, warrant, right or other security which is issued by CSI as) a dividend
or other distribution with respect to, or in exchange for, or in replacement of
such CSI Stock) which any such STOCKHOLDER requests, provided that CSI shall
have the right to reduce the number of shares included in such registration to
the extent that inclusion of such shares could, in the opinion of tax counsel to
CSI or its independent auditors, jeopardize the status of the transactions
contemplated hereby and by the Registration Statement as a tax-free
organization. In addition, if CSI is advised in writing in good faith by any
managing underwriter of an underwritten offering of the securities being offered
pursuant to any registration statement under this Section 17.1 that the number
of shares to be sold by persons other than CSI is greater than the number of
such shares which can be offered without adversely affecting the offering, CSI
may reduce pro rata the number of shares offered for the accounts of such
persons (based upon the number of shares held by such person) to a number deemed
satisfactory by such managing underwriter, provided, that, for each
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such offering made by CSI after the IPO, such reduction shall be made first by
reducing the number of shares to be sold by persons other than CSI, the
STOCKHOLDERS and the stockholders of the Other Founding Companies (collectively,
the STOCKHOLDERS and the stockholders of the other Founding Companies being
referred to herein as the "Founding Stockholders"), and thereafter, if a further
reduction is required, by reducing the number of shares to be sold by the
Founding Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date one year
after the Closing and prior to the date three years after the Closing, the
holders of a majority of the shares of CSI Stock issued to the Founding
Stockholders pursuant to this Agreement and the Other Agreements which have not
been previously registered or sold and which are not entitled to be sold under
Rule 144(k) (or any similar or successor provision) promulgated under the 1933
Act may request in writing that CSI file a registration statement under the 1933
Act covering the registration of the shares of CSI Stock issued to the
STOCKHOLDERS pursuant to this Agreement and the Other Agreements (including any
stock issued as (or issuable upon the conversion or exchange of any convertible
security, warrant, right or other security which is issued by CSI as) a dividend
or other distribution with respect to, or in exchange for, or in replacement of
such CSI Stock) then held by such Founding Stockholders (a "Demand
Registration"). Within ten (10) days of the receipt of such request, CSI shall
give written notice of such request to all other Founding Stockholders and
shall, as soon as practicable but in no event later than 45 days after notice
from any STOCKHOLDER, file and use its best efforts to cause to become effective
a registration statement covering all such shares. CSI shall be obligated to
effect only one Demand Registration for all Founding Stockholders and will keep
such Demand Registration current and effective for not less than 90 days (or
such shorter period as is required to sell all of the shares registered
thereby).
Notwithstanding the foregoing paragraph, following any such a demand, a
majority of CSI's disinterested directors (i.e. directors who have not demanded
or elected to sell shares in any such public offering) may defer the filing of
the registration statement for up to a 30 day period after the
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date on which CSI would otherwise be required to make such filing pursuant to
the foregoing paragraph.
If at the time of any request by the Founding Stockholders for a Demand
Registration CSI has fixed plans to file within 60 days after such request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' CSI
Stock shall be initiated under this Section 17.2 until 90 days after the
effective date of such registration unless CSI is no longer proceeding
diligently to effect such registration; provided that CSI shall provide the
Founding Stockholders the right to participate in such public offering pursuant
to, and subject to, Section 17.1 hereof.
17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with
the registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by CSI. In connection with
registrations under Sections 17.1 and 17.2, CSI shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the CSI Stock and use its best efforts to
cause such registration to promptly become and remain effective for a period of
at least 90 days (or such shorter period during which holders shall have sold
all CSI Stock which they requested to be registered); (ii) use its best efforts
to register and qualify the CSI Stock covered by such registration statement
under applicable state securities laws as the holders shall reasonably request
for the distribution for the CSI Stock; and (iii) take such other actions as are
reasonable and necessary to comply with the requirements of the 1933 Act and the
regulations thereunder.
17.4 UNDERWRITING AGREEMENT. In connection with each registration
pursuant to Sections 17.1 and 17.2 covering an underwritten registered offering,
CSI and each participating holder agree to enter into a written agreement with
the managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
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managing underwriters and companies of CSI's size and investment stature,
including indemnification.
17.5 AVAILABILITY OF RULE 144. CSI shall not be obligated to register
shares of CSI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER.
17.6 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the SEC that may permit the sale of CSI stock
to the public without registration, CSI agrees to use its best efforts to:
(i) make and keep public information regarding CSI available as
those terms are understood and defined in Rule 144 under the 1933 Act
for a period of four years beginning 90 days following the effective
date of the Registration Statement;
(ii) file with the SEC in a timely manner all reports and other
documents required of CSI under the 1933 Act and the 1934 Act at any
time after it has become subject to such reporting requirements; and
(iii) so long as a STOCKHOLDER owns any restricted CSI Common
Stock, furnish to each STOCKHOLDER forthwith upon written request a
written statement by CSI as to its compliance with the reporting
requirements of Rule 144 (at any time from and after 90 days following
the effective date of the Registration Statement, and of the 1933 Act
and the 1934 Act (at any time after it has become subject to such
reporting requirements), a copy of the most recent annual or quarterly
report of CSI, and such other reports and documents so filed as a
STOCKHOLDER may reasonably request in availing itself of any rule or
regulation of the SEC allowing a STOCKHOLDER to sell any such shares
without registration.
18. GENERAL
18.1 COOPERATION. The COMPANY, STOCKHOLDERS, CSI and NEWCO shall each
deliver or cause to be delivered to the other on the Funding and Consummation
Date, and at such
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other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The COMPANY will cooperate and use its reasonable efforts to
have the present officers, directors and employees of the COMPANY cooperate with
CSI on and after the Funding and Consummation Date in furnishing information,
evidence, testimony and other assistance in connection with any tax return
filing obligations, actions, proceedings, arrangements or disputes of any nature
with respect to matters pertaining to all periods prior to the Funding and
Consummation Date.
18.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of CSI, and the heirs and legal representatives of the STOCKHOLDERS.
18.3 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANY, NEWCO and CSI and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the STOCKHOLDERS, the COMPANY, NEWCO and CSI,
acting through their respective officers or trustees, duly authorized by their
respective Boards of Directors. Any disclosure made on any Schedule delivered
pursuant hereto shall be deemed to have been disclosed for purposes of any other
Schedule required hereby, provided that the COMPANY shall make a good faith
effort to cross reference disclosure, as necessary or advisable, between related
Schedules.
18.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
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18.5 BROKERS AND AGENTS. Except as disclosed on Schedule 18.5, each
party represents and warrants that it employed no broker or agent in connection
with this transaction and agrees to indemnify the other parties hereto against
all loss, cost, damages or expense arising out of claims for fees or commission
of brokers employed or alleged to have been employed by such indemnifying party.
18.6 EXPENSES. Whether or not the transactions herein contemplated shall
be consummated, CSI will pay the fees, expenses and disbursements of CSI and its
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by CSI under this Agreement, including the fees and expenses of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, L.L.P., and any other person or
entity retained by CSI or by Notre Capital Ventures II, L.L.C., and the costs of
preparing the Registration Statement. Each STOCKHOLDER shall pay all sales, use,
transfer, real property transfer, recording, gains, stock transfer and other
similar taxes and fees ("Transfer Taxes") imposed in connection with the Merger,
other than Transfer Taxes, if any, imposed by the State of Delaware. Each
STOCKHOLDER shall file all necessary documentation and Returns with respect to
such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he, and not
the COMPANY or CSI, will pay all taxes due upon receipt of the consideration
payable pursuant to Section 2 hereof, and will assume all tax risks and
liabilities of such STOCKHOLDER in connection with the transactions contemplated
hereby.
18.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party.
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(a) If to CSI, or NEWCO, addressed to them at:
Comfort Systems USA, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇
with copies to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, L.L.P.
South Tower Pennzoil Place
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(b) If to the STOCKHOLDERS, addressed to them at their
addresses set forth on Annex IV, with copies to:
▇▇▇▇ ▇▇▇▇▇▇▇
Van Cott, ▇▇▇▇▇▇, Cornwall & ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
(c) If to the COMPANY, addressed to it at:
Freeway Heating & Air Conditioning, Inc.
▇▇▇ ▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-73-
and marked "Personal and Confidential"
with copies to:
Comfort Systems USA, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
18.8 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
18.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties until the Expiration Date.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such
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modification is not possible, such provision shall be severed from this
Agreement, and in either case the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
18.13 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of CSI, NEWCO, the COMPANY and STOCKHOLDERS who hold or who will
hold at least 50% of the CSI Stock issued or to be issued upon consummation of
the Merger. Any amendment or waiver effected in accordance with this Section
18.15 shall be binding upon each of the parties hereto, any other person
receiving CSI Stock in connection with the Merger and each future holder of such
CSI Stock.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
COMFORT SYSTEMS USA, INC.
By:/S/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
FREEWAY ACQUISITION CORP.
By:/S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇
Title: President
FREEWAY HEATING & AIR CONDITIONING,
INC.
By:/S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
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STOCKHOLDERS:
/S/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
/S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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ANNEX III
TO THAT CERTAIN
AGREEMENT AND PLAN OF ORGANIZATION
DATED AS OF MARCH 18, 1997
BY AND AMONG
COMFORT SYSTEMS USA, INC.
FREEWAY ACQUISITION CORP.
FREEWAY HEATING & AIR CONDITIONING, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
CONSIDERATION TO BE PAID TO STOCKHOLDERS
Aggregate consideration to be paid to STOCKHOLDERS:
$5,195,086 in cash and the value of outstanding Common Stock of CSI
(assuming an offering price of $13.00 per share), consisting of 319,698
shares of CSI Stock and $1,039,012 in cash, it being agreed that the
actual amount of all cash payments described in this Annex III will
depend on the actual initial offering price of the Common Stock of CSI
in the IPO, and may be more or less than $13.00 per share; provided,
however that such price shall not be less than $8.00 per share.
CONSIDERATION TO BE PAID TO EACH STOCKHOLDER:
---------------------------------------------
Shares of Common Cash
STOCKHOLDER STOCK OF CSI ($)
----------- ---------------- ---------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ 57,901 $ 188,175
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 156,652 509,119
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 83,121 270,140
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 22,024 71,578
TOTALS: 319,698 $ 1,039,012
MINIMUM VALUE: $3,196,976 (based on a price of $8.00 per share)
ANNEX IV
TO THAT CERTAIN
AGREEMENT AND PLAN OF ORGANIZATION
DATED AS OF MARCH 18, 1997
BY AND AMONG
COMFORT SYSTEMS USA, INC.
FREEWAY ACQUISITION CORP.
FREEWAY HEATING & AIR CONDITIONING, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
The following is a list of the STOCKHOLDERS, their addresses and the number of
shares of the COMPANY Stock held by each thereof:
STOCKHOLDER ADDRESSES NO. SHARES HELD
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ 326
-------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 882
-------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 468
-------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 124
------- ---
Total Outstanding 1,800